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On July 1st, European Central Bank (ECB) Vice President Aleksandar Vujic stated that the bank will likely await further data, such as the latest macroeconomic forecasts to be released at its September meeting, before deciding on its next interest rate move. Speaking during the ECB meeting in Portugal, he said, "We must wait for the data to come out until the July meeting; then in September, we will have new forecast data and make a decision based on the further data received at that time." Vujic pointed out that the central bank will not pre-commit to a specific interest rate path. He noted that the June inflation data so far has not yielded any surprises. The ECB last raised interest rates at its June meeting, when it increased them by 25 basis points.According to reports, the Iranian and US negotiating teams did not hold face-to-face talks, but instead held indirect talks in Qatar through mediators on a rotating basis.ECB Governing Council member Kochel: The threat of inflation has decreased, but it has not been completely contained. The next decision will be to raise interest rates or keep them unchanged.July 1st - Monex Europe analysts stated that the euro faces further downside risk if Wednesdays Eurozone inflation data falls short of expectations and European Central Bank President Christine Lagarde cools expectations for further rate hikes. In a report, they stated that inflation data is likely to be weaker than anticipated, given that data from Germany, France, and Italy came in weaker than expected. They suggested this could reinforce the view that the ECB will "stop there" after last months rate hike. Lagarde may also confirm this view at the ECB forum in Portugal on Wednesday.ECB Governing Council member Nagel: The rise in German energy prices has produced almost no second-round effect.

The EUR/GBP exchange rate recovers above 0.8000 in advance of Eurozone inflation and UK gross domestic product

Alina Haynes

Mar 30, 2023 16:05

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The EUR/GBP pair extended its recovery above 0.88 during the Asian trading session. Anticipating that the European Central Bank (ECB) will continue to raise interest rates to combat persistent inflation, the cross has depreciated progressively. Friday will see the publication of preliminary Eurozone Harmonized Index of Consumer Prices (HICP) and Gross Domestic Product (GDP) (Q4) figures. Prior to the publication of these figures, it is anticipated that the asset will exhibit explosive activity.

 

It is anticipated that the preliminary Eurozone HICP will decelerate significantly from 8.5% to 7.3%. While it is anticipated that the core HICP will rise to 5.7% from 5.6% in the previous release. Weak energy prices are anticipated to have a significant impact on Eurozone inflation. In light of Christine Lagarde's prediction that inflation will remain elevated for an extended period of time, the European Central Bank (ECB) is expected to continue tightening monetary policy.

 

In the interim, banking tensions are subsiding as the absence of information regarding additional collateral damage has a positive impact on the market. Chief Economist Philip Lane stated on Wednesday that ECB interest rates must rise if banking tension has no or a "relatively limited" impact.

 

Investors avidly anticipate the United Kingdom's Gross Domestic Product (GDP) data. According to the consensus, the United Kingdom's growth in the fourth quarter of CY2022 remained unchanged. It is anticipated that the annual GDP will remain unchanged at 0.4%. It is expected that the British economy will undergo a severe recession as a result of high inflation and sluggish growth.

 

The Bank of England (BoE) policymakers appear confident that inflation will moderate in the near future and that the unexpected rise in February's inflation was a one-time anomaly; however, the absence of evidence raises doubts. If inflation persists, BoE Governor Andrew Bailey stated that additional rate increases would be announced. In contrast, Bank of America (BoA) analysts anticipate that the Bank of England (BoE) will not increase rates and will maintain current levels until 2024.


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