The EURGBP exchange rate was higher as yields climb higher in the United Kingdom.
EURGBP – Daily Chart
The price of the EURGBP has bounced on Wednesday after recent selling subsided. The pair is still outside of the uptrend line and needs to get back above there to rally higher.
Data for the EUR V GBP exchange rate tomorrow comes at 15:30 pm HKT, accompanied by the HCOB PMI data for manufacturing and services. Germany and the Eurozone both release their latest numbers, which could have an important say in the next path of the pair. The euro is attempting a bounce but may fail.
The UK economy remains under pressure, facing tough decisions following higher inflation. UK inflation rose to 3.8%, according to the Office for National Statistics, the highest level since January 2024.
The increase was largely driven by soaring air fares, which jumped by 30.2%, driven by higher school holiday prices. Food price inflation was also higher at 4.9% driven by higher prices for goods including beef, coffee, and orange juice.
UK Chancellor Rachel Reeves said there is “more to do to ease the cost of living”, with the country also facing budget stress, which is continuing to hike taxes. The economic stress is taking its toll on government borrowing costs, which are now at levels not seen in 27 years. The yield on 30-year bonds is now trading at 5.61%, bringing it close to the levels of May 1998.
Benchmark 10-year gilt yields were also higher, up 0.05 percentage points to 4.74%. The UK’s 30-year bond is also now at a 14-year high versus German borrowing costs.
Analysts are currently anticipating one more interest rate cut from the European Central Bank, which may come in September. However, recent inflation rises in the U.S. and UK may put that on hold.
