The Euro has risen to 0.8545 against the Pound today, the best exchange rate since late April. This advance has been caused by a historic meeting between the new French President and the German Chancellor.
- EUR GBP trades up at 0.8554 – GBP EUR rate dips to 1.1688
- Euro rallies as French and German leaders meet – Traders hope for stronger Eurozone
- Pound slides against Euro despite soaring inflation – UK inflation hits 2.7% in April
- Eurozone inflation stats could further EUR gains – Will UK earnings figures show wage squeeze?
France’s new President, Emmanuel Macron, has been quick off the mark, appointing a new Prime Minister and meeting with German Chancellor Angela Merkel.
The centrally-aligned Macron has chosen a right-wing Republican, Edouard Phillipe, for PM. Macron is seemingly banking on Republican support in June’s parliamentary elections, or for a more dramatic ‘peeling away’ of wavering Republican figures from the right to the centre.
Meanwhile, the meeting between Macron and Merkel has raised hopes for the future of the Eurozone, as well as the European Union. In her own words, Merkel stated that;
‘From a German point of view, it is possible to change treaties if it makes sense in order to strengthen the Eurozone’.
On Macron’s side, the new President has offered reassurance by rejecting a controversial ‘Eurobond’ debt scheme;
‘I will reform not because Europe asks for it, but because France needs it. I am not in favour of collectivising debts of the past. It leads to an irresponsible politics’.
These events have effectively shown Macron passing his first ‘test’ as President, which bodes well for his future leadership.
Other Eurozone news today has seen the overall trade surplus rise in March, while German and Eurozone ZEW confidence scores have risen above forecasts.
UK news has focused on inflation rates in April. The headline movement is an annual rise from 2.3% to 2.7%, while the monthly result has also climbed from 0.4% to 0.5%.
Both results have exceeded forecasts, but the Pound has failed to rise on such news. Higher inflation would usually boost Pound demand on hopes of an earlier Bank of England (BoE) interest rate hike.
It may be evidence of a wage squeeze that has held investors back; an inflation rate above the rate of wage growth is likely to slow UK retail activity in the future.
Wednesday’s Eurozone data releases will cover inflation in April. Forecasts are for an annual rise but monthly dip; annual figures are usually more impactful, so the Euro could rise on the news.
The Pound may also worsen against the Euro on Wednesday when major UK jobless claims, unemployment rate and wage growth figures are published.
Earnings with bonuses are forecast to rise in March, but only to 2.4% compared to April’s 2.7% rate of inflation. If unemployment and claims unexpectedly rise, the GBP EUR exchange rate could slump on fears of a protracted wage squeeze dampening economic growth.
Current Interbank EUR GBP Exchange Rates
At the time of writing, the Euro to Pound (EUR GBP) exchange rate was trading up at 0.8554 and the Pound to Euro (GBP EUR) exchange rate was trading down at 1.1688.