The euro was down 0.25% against both the pound and dollar on Tuesday as hope for a Ukrainian peace saw investors selling banked currency and buying European stocks instead. However, new UK data shows the rise in inflation has accelerated – putting fresh pressure on the Bank of England.
The Office for National Statistics (ONS) revealed this morning that core inflation, which doesn’t include food or energy, had risen to 3.8%.
The Bank of England’s stated target is 2% and one of its few tools to achieve that is to keep interest rates high, so this rise may put pressure on its plans to cut interest rates later this year.
The main culprit for price rises, was the cost of petrol and diesel, with foods such as coffee, meat and chocolate also seeing significant rises. Not to be outdone, UK rail fares are set to increase by nearly 6% next year.
Later today, the EU will publish its own inflation data. The bloc has been much more successful at controlling inflation and has already hit its 2% target. Analysts predict it will remain at 2%, but the impact of US President Donald Trump’s tariffs may upset that.
Tuesday saw the euro dropping against both the pound and the dollar, but there was also a climb in the value of European stocks and shares such as the DAX performance index. This suggests that the drop in value was because investors were putting their money into businesses that had been seen as riskier due to the war in Ukraine.
Meanwhile in the US, the dollar saw gains on the euro and pulled ahead of the pound slightly. There are few major data releases due this week, though Federal Reserve Chair Jerome Powell is due to speak on Friday, where he may indicate if or when the US central bank will cut interest rates.
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