GBP/EUR reached a 2.5 year high yesterday breaking above the 1.21 mark, 1.2103 to be exact. Recent development in Germany is causing politic uncertainty, with a vote of confidence for the running government to take place in January. This was also fuelled by planned tariffs from the US, with America being Europe’s largest trading partner. In other words, we are seeing more of EUR weakness rather than GBP and USD strength.
The market motive of negative impacts on Europe could well be ‘sticky’ and linger around until we have a full idea of how tariffs will be shaped and get a better outlook on Germany’s political situation. We have seen a GBP/EUR pullback slightly in this morning session, moving around the 1.2060 region.
German inflation levels rose in October, noticing a month-on-month incline of 0.4% - moving Germany’s inflation level back to 2% year-on year. ECB members recently stated that they did not want to see its largest economy, Germany, inflation levels to rise above the 2% mark – potentially forcing the European Central Bank to further rate cuts.
