EUR GBP Bounces from Four Day Losing Streak

EUR GBP Dips as ECB Sees Inflation Peak in November

The EUR GBP exchange rate was 0.40% higher on Thursday as the euro erased much of the losses from Wednesday’s UK inflation report. The pound sterling has been on a four-day winning streak against the euro but some profit taking may be setting in. Higher inflation and stronger inflation fuelled expectations of a December rate hike by the BoE.

The EUR v GBP was trading at 0.8420 after a jump back above the 0.8400 level.

Coronavirus lockdowns back on the table for Europe

Austria looks to be the first European country that will instigate a full lockdown after an initial plan to lockdown the unvaccinated. Germany is also moving towards tougher restrictions over warnings of a tough Christmas.

Switzerland’s health minister insisted on Thursday that restrictions were not necessary in the country despite daily new cases quadrupling in a month to an all-year high, AFP reports.

“We are clearly facing the fifth wave,” Alain Berset told a news conference, adding that the course of the pandemic “will depend on the behaviour of all of us”.

As part of its direct democracy system, Switzerland will vote on 28th November on its virus restrictions, including the passport.

France and Italy have also seen cases rising in recent days and the situation in the UK is also not ideal. There was talk yesterday that Boris Johnson was considering a lockdown for the vaccinated.

The coronavirus situation will have a large bearing on the direction of the euro versus the pound as the winter weather gets colder.

Pension warnings in the UK as families with 55%Sunak tax

Hundreds of thousands more Britons could be affected by tax charges of 55 percent following the freezing of the lifetime allowance.

The lifetime allowance restricts the amount Britons can put into their private pension pots during their lifetime. The limit has traditionally increased each year with inflation but will now stay the same for the next five years. That is a problem when inflation is forecast to hit 5% and was already above analysts’ expectations at 4.2% for October. That is just another headache that the Bank of England faces if inflation does not come under control.

The only way to get inflation under control is with rate hikes and that means pressure for households on mortgage payments. The chickens are coming home to roost for the global economy after years of mismanagement.

An interest rate hike is likely a certainty in December after yesterday’s inflation, but the employment numbers this week also removed a key obstacle.

BoE Governor Bailey told MPs this week:

“I’m very uneasy about the inflation situation – I want to be very clear on that It is not of course where we wanted to be, to have inflation above target.”

The Bank of England are still insisting that the inflationary pressures are temporary and there is no risk of a wage-price spiral in the country due to inflation eating up any wage gains.

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