The EUR GBP exchange rate was lower by -0.08% on Wednesday as traders paused to consider European inflation at a 24-yr high. The latest figures will heap further pressure on the European Central Bank to talk tough on tackling higher prices. The OECD has said that the UK will outperform the G7 this year and next. Boris Johnson is remaining calm with the variant emergence and that has also supported the pound.
The EUR v GBP trades at 0.8511 with resistance ahead at the 0.8580 level.
European inflation hits a 24-year high in November
Eurostat has said that inflation in the euro countries had soared to 4.9% in November, largely driven by higher energy prices.
The number marked the highest rate since 1997, when the European Union started collecting data ahead of the launch of the euro in 1999, and up from 4.1% in October.
According to a flash estimate from Eurostat, energy prices rose by 27.4% in November. Services inflation came in at 2.7%.
“The surge in headline inflation continues to be mainly driven by higher energy prices, but core inflation also saw a surprisingly strong increase, likely linked to a surge in German package holiday prices,” wrote Katharina Koenz, an economist at Oxford Economics.
The figures were released a day after Europe’s biggest economy Germany saw consumer prices rise by 5.2% in November. German inflation was above 4% for the first time in nearly 30 years in September.
The latest numbers will put further pressure on the European Central Bank to at least pay lip service to higher interest rates.
Johnson ignores travel advice, UK seen outperforming the G7
Boris Johnson has been accused of “ignoring Sage advice” at Prime Minister’s Questions after a leaked report asked ministers to toughen up travel restrictions to combat the Omicron variant.
The report warned that the latest variant could spark a “very large wave” of infections and urged the prime minister to impose “very stringent rules”.
Official notes from the sage meeting on November 29th, claimed a wave of cases would “in turn lead to a potentially high number of hospitalisations even with protection against severe disease being less affected.”
Mr Johnson said: “This country was the first to respond to the variant with travel bans. As for the countries that are seeding the Omicron variant, we’ve put them on the red list.”
The actions of the Prime Minister are helping to support the pound sterling, with Europe more likely to head into lockdown on the current path.
Meanwhile, the OECD has said the UK will outperform the G7 this year and next, but there are risks with the variant, supply chains and inflation. The Organisation for Economic Co-operation and Development said Britain is on track for growth to increase by 6.9% in 2021, with growth of 4.7% in 2022 and 2.1% in 2023.
The OECD also downgraded the global growth outlook and its Chief Economist said: “We are concerned that the new variant of the virus, the Omicron strain, is further adding to the already high levels of uncertainty and risks, and that could be a threat to the recovery.”
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