After almost reaching multi-year highs on Tuesday, Cable plummeted on Wednesday and closed below the 1.1450 mark. GBPEUR also made a significant loss yesterday, losing its grip on the 1.16 handle early in the session. Despite these losses, the latest UK Inflation figures came out 1.5% higher for April in comparison to the same time last year. This is mainly due to the recent lifting of lockdown restrictions and prices moving higher for clothing and energy. The Chief Economist of the Office for National Statistics (ONS), Grant Fitzner, said that “inflation rose in April, mainly due to prices rising this year compared with the falls seen at the start of the pandemic this time last year. This was seen most clearly in household utility bills and clothing prices”. While the latest UK Inflation figures shows signs of improvement, many investors will have been “disappointed… with prices not rising as fast” as in the United States.
According to Eurostat, Eurozone Inflation was also higher in April, again due to rises in the costs of energy and services. The ECB has made it clear on several occasions that they want to see inflation move closer to 2%. ECB member and Bank of France governor, Francois Villeroy de Galhau, reiterated the central banks intentions this week when he said, “there is no doubt that the monetary policy of the ECB will remain very accommodative” in order to achieve its target.
After strong beginning to the week, GBPUSD opened yesterday at 1.4200. The pair quickly came under significant selling pressure and dropped into the 1.41’s. Cable finally ended the day at 1.4145.
Having spent the week comfortably above the 1.16 handle, GBPEUR opened at 1.1600 and depreciated rapidly. The pair went on to close Wednesday at 1.1579.
EURUSD in contrast traded rather flat in the session. The pair opened at 1.2239 and closed at 1.2216.