Pure FX Blog

13 September 2017

Pound Hits 6-Week High Versus Euro, as UK Inflation Hits 5-Year High

The pound to euro interbank exchange rate has hit 1.1111 today, its highest since August 2nd, as UK inflation rose to 2.9% last month. Image credit: William Lepretre.

The pound to euro interbank exchange rate has hit 1.1111 today, its highest since August 2nd, as UK inflation rose to 2.9% last month. Image credit: William Lepretre.

by Peter Lavelle

Welcome to Pure FX’s latest update of the pound to euro interbank exchange rate.

Sterling flies higher versus the common currency! The pound to euro interbank exchange rate has hit 1.1111 today, its highest in 6 weeks, or since August 2nd.

The pound has strengthened against the euro, because UK inflation rose +0.3% in August, to 2.9%, its joint-highest in 5 years, said the Office for National Statistics yesterday.

In particular, the cost of clothing and footwear in the UK rose +4.6% last month, the most since records began, while petrol prices climbed too, thereby lifting the pound.

This has boosted sterling, because when UK inflation rises, this lifts the odds that the Bank of England (BoE) will lift interest rates, above their current all-time low of 0.25%.

To be specific, it’s thought that BoE chief economist Andy Haldane may vote to lift interest rates as soon as this Thursday, making higher UK interest rates more likely, and lifting the pound!

Euro weakens, as ECB’s Cœuré talks down the euro

Moreover, the pound has also strengthened against the euro, because European Central Bank executive Benoit Cœuré has talked down the euro, in a speech yesterday.

Speaking in Frankfurt, Mr. Cœuré mentioned the exchange rate a massive 48 times in his speech, suggesting that he’s very concerned about the euro’s value, and weakening the euro.

In particular, Mr. Cœuré suggested that the strong euro may weigh further on Eurozone inflation, reducing the need for the ECB to hike interest rates, and so dragging down the euro.

The strong euro can lead to “undesirable consequences for the inflation outlook” in the common currency bloc, added Mr. Cœuré in his speech, thereby weighing on the euro.

With all this in mind, the pound to euro interbank exchange rate has hit this 6-week high today!

Get a free pound to euro exchange rate quote

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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