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GBP/EUR rates spike up following positive inflation (Joshua Privett)
GBP/EUR rates made significant inroads back into the 1.40’s this morning with the release of UK inflation data.
Last month, for the first time since records began in 1960, inflation came in as a negative figure. This caused Sterling to crash last month and GBP/EUR rates fell back below 1.40. Usually deflation takes a while to combat, which is why this modest move of 0.1% into positive territory was recieved particularly well, with GBP/EUR rates rising from 1.405 to 1.423 throughout the course of the day.
This effect on the markets may seem like an overreaction for such a small increase, but it was predicted that such a small rise would have a disproportionate affect on GBP/EUR rates. Previously it seemed like the Bank of England would not raise rates until inflation hit the target set at 2%. Some members are starting to change their tune.
Forbes and Miles believe that raising rates wont have any real affect on the economy for at least a year or two after their introduction. As such, rates can be raised responsibily if they believe the target rate of inflation will be met within a two year period of that rise. So even a small move back into positive territory spelled GBP strength as some believed the UK’s timeline for raising rates was moved forward.
However, I would take these words with a pinch of salt. The modest increase of 0.1% could easily turn negative once more, and due to the recent downgrade in global growth with China’ slowing economy, I would not rely on any smooth road towards higher rates.
I would recommend that anyone looking to buy Euros should move whilst the rates have artificially been moved in your favour. Email me overnight on [email protected] for tailoured advice to your situation and a free quote on your transfer. I guarantee to make you a saving against your current provider.
Source: http://www.eurorateforecast.com/2015/08/18/gbpeur-rates-spike-up-following-positive-inflation-joshua-privett/
