The Pound Euro (GBP EUR) exchange rate slumped around a cent from its best levels yesterday as markets reacted positively to Emmanuel Macron’s first day as French President.
Macron’s first move as President was to appoint Édouard Philippe, a Republican mayor from Le Havre, as his new Prime Minister as he attempts to find bi-partisan support for his upcoming economic reforms.
The appointment was a another blow to the already divided Les Républicains party and prompted around 20 MP’s to break ranks and call for the party to work with the new President as they stated that the right needs to ‘take the full measure of the political transformation taking place before their eyes’ and accept the ‘outstretched hand’ offered by Macron.
Markets also welcomed a joint press conference with Macron and German Chancellor Angela Merkel on Monday in which they spoke of striving to ‘deepen the European Union’ and said that the two would work closely on reforms to the Eurozone.
GBP EUR was weakened further this morning by a robust Eurozone GDP print as economic growth in the bloc held at 0.5% in the first quarter thanks to a strong reading from Germany.
Meanwhile the Pound was softened by the UK’s latest CPI figures as inflation surged from 2.3% to a near four-year high of 2.7%, sailing past initial expectations that it would rise to 2.6%.
There are growing fears that the rapid acceleration in inflation will place even more pressure on consumer spending over the coming months, following a recent report that wage growth is expected fall to just 1% over the next year.
Investors are also unsure if the rise will prompt the Bank of England (BoE) to begin hiking interest rates, after Governor Mark Carney said as recently as last week that inflation was not a major concern for the bank.
Looking ahead the GBP EUR exchange rate may rally tomorrow if the UK’s unemployment rate unexpectedly drops from 4.7% in March.
Meanwhile the Euro may be strengthened by an uptick in Eurozone inflation as economists forecast that it will rise from 1.5% to 1.9%, just shy of the European Central Bank’s (ECB) target rate of 2.0%.
Current Interbank Exchange Rates
At the time of writing the GBP EUR exchange rate was trending around 1.1677 and the EUR GBP exchange rate was trending around 0.8563.
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