- Pound (GBP) limited by Brexit concerns
- All eyes on BoE rate decision on Thursday
- Euro (EUR) fell despite strong GDP & high CPI data
- German retail sales due
The Pound Euro (GBP/EUR) exchange rate is moving just a few points higher at the start of the week. The pair settled gained 0.3% across the previous week, settling on Friday at €1.1838 after reaching as high as €1.1903 earlier in the week. At 05:45 UTC, GBP/EUR trades +0.01% at €1.1840.
The Pound managed to gain ground last week as rising expectations that the Bank of England will cut interest rates at the November monetary policy meeting overshadowed rising Brexit tensions.
Brexit headlines are going from bad to worse and the UK is considering halting cooperation over Northern Ireland. Brexit headlines will continue to be watched carefully.
However, the main focus this week is the BoE interest rate decision. According to the CME Group BoE watch tool, a rate hike in 100% priced in for November. With inflation elevated at 3.2%, and more hawkish commentary from BoE policy makers, the market is certain a rate rise is coming.
The Euro finished the previous week on the back foot after mixed data from the region. Eurozone GDP rose to within 1% of its pre-pandemic level in the July – September period thanks to quarterly growth of 2.2%, this was ahead of analysts forecasts of 2% and was inline with growth in the second quarter. However, Germany was a noticeable weak link. GDP in the Eurozone’s largest economy grew 1.8% quarter on quarter in Q3, down from 1.9% in the second quarter and well short of the 2.2% forecast by analysts.
Eurozone inflation was also stronger than forecast at 4.1% a fresh 14 year high amid the ongoing energy crunch. Earlier in the week the ECB had said that they still consider than inflation is transitory and will come down next year.
Today the focus is on German retail sales which are expected to have rebounded in September to 1.8% year on year, up from 0.4%.