The EURGBP exchange rate was flat on Thursday but was aiming for a move to the 0.8400 level ahead of the latest UK GDP figures. Analysts will see a three-month update for GDP into November with expectations for a 0.8% quarterly return, but that is lower than last month and inflation still looms.
The EUR to GBP rate was trading at 0.8350 ahead of the economic data. There is also a full-year figure for the German economy.
UK and German GDP figures likely to drive the GBP v EUR
The pound sterling versus the euro will look to the latest GDP figures from the UK and Germany on Friday for price drivers.
Last month’s 3-month update into October came in at 0.9%, while the November figure is expected to be 0.8%. Despite the slowdown, the UK has outperformed the G7 economies this month, while it was also predicted to top the list of countries in 2022. That will depend on the latest restrictions and today’s figures will highlight the economic performance ahead of December’s Plan B measures.
Traders will be looking for the UK to beat the 3-month expectations, but there also fears that the UK economy will run into a stagflation wall due to inflation.
Prices are rising well ahead of wages and with a stagnating economy, the UK would be back to a similar vibe to the 1970s. Brian Reading, economic adviser during that time, said that the country faced a dangerous moment.
“Price inflation is gathering momentum. All now depends on whether this triggers a full blown wage-price-pensions-tax-sterling depreciation spiral”.
Samuel Tombs, chief UK economist at Pantheon Macroeconomics, said that inflation should remain near the latest 5.1% before moving to 6% in April.
Tombs said that the latest inflation surge would be “uncomfortably high” for the Bank of England. The Bank will meet on Thursday to decide the latest interest rate path and the International Monetary Fund has urged them to raise rates again, after a move to 0.25% in December. The raise took markets by surprise after a November disappointment, but there are more hikes expected in 2022.
Hopes that the Omicron variant has peaked in the UK
Coronavirus rates in the UK were lower by 20,000 with 109,000 cases reported. Fatalities linked to the virus were also down and there were hopes that the variant may have peaked.
Ministers in the UK and Europe have both been talking of living with the virus as the new variant continues to be milder in symptoms.
Other scientists have said that the UK may be the first country to exit the pandemic, due to its earlier reopening last year.
The pound sterling has paused after taking a hit on the admission by Boris Johnson that he had attended a garden party at the height of the pandemic.
The EUR GBP trades at 0.8350 as it seeks to find a bottom at the 0.8300 level with 0.8400 up ahead.
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