Euro Edges Up Against Pound After German Inflation Data
The Euro (EUR) regained some ground against the British Pound (GBP) on Wednesday after hot German inflation data offset risk-off sentiment in the markets. The EUR/GBP pair rose to levels above 0.8540, but remains in a bearish short-term trend.
The Harmonized Index of Consumer Prices (HICP) in Germany accelerated to a 2.8% year-over-year rate in July, up from 2.4% in June, driven by a sharp increase in energy prices to 7.3% over the same period.
The Pound is faring better than the Euro due to growing tensions in the Middle East, which have pushed oil prices higher. The barrel of Brent Oil reached levels beyond $88.00 on Wednesday, about 13% up from last week's highs, fueling inflationary pressures across the board and adding pressure on the Eurozone's oil-importing economies.
The UK calendar is quiet on Wednesday, but investors will be closely watching the second quarter's preliminary Gross Domestic Product (GDP) release due on Thursday for further guidance on the Bank of England's near-term monetary policy. Strategists at Brown Brothers Harriman warn that 'absent a GDP beat, UK rate pricing looks vulnerable to a dovish repricing against the Pound.'