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The pound is still strong against both the euro and the dollar after inflation data was released for the UK this morning.
Inflation rose in April, both annually and month-on-month, due to the reopening of the UK economy. Consumer prices are at their highest since March 2020.
EU ambassadors are due to hold talks in Brussels today about whether to allow fully vaccinated tourists from the UK into the EU without restrictions. Despite this, most European countries are still on the UK’s ‘amber’ list, and the Prime Minister said yesterday that amber countries should not be visited for holidays.
In the US, the markets await the release of the Federal Reserve’s latest meeting minutes this afternoon.
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GBP: Inflation increases in April as UK reopens
The pound is trading around the same levels against the euro this morning and is strong against the dollar.
A series of inflation rate data was released this morning. Annual inflation rate for April increased by 1.5%, beating forecasts of 1.4%. This was the highest rate since March 2020 due to the reopening of businesses and because the cap on energy bills has been lifted. The month-on-month reading increased by 0.6%, the highest in 2 years.
The retail price index for April also significantly increased month-on-month and annually. Clothing and footwear prices rose by 2.4%.
GBP/USD chart
EUR: Euro strong ahead of inflation figures
The euro is still strong against the dollar this morning after making gains over the past week and month.
The Eurozone’s GDP figure for the first quarter of this year was released yesterday. As forecast, the economy shrank 0.6% quarter-on-quarter in January-March 2021, entering a double-dip recession. Year-on-year, the economy shrank by -1.8%, the fifth consecutive quarter of contraction.
Today, the European Central Bank will publish its Financial Stability Review. Inflation rate figures for April will also be released.
USD: FOMC meeting minutes today
The dollar is at multi-month lows against a basket of currencies this morning ahead of the release of the Federal Reserve’s latest meeting minutes.
The minutes are expected to reveal that policymakers still think the US economy needs support as it emerges from the pandemic.
The greenback could weaken further if the Bank repeats its message that an ‘ultra-loose’ monetary policy will be maintained, despite the uptick in inflation.
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