- Pound (GBP) awaits BoE rate announcement
- BoE is expected to hike rates by 25 bp
- Euro (EUR) gains despite weaker data
- German factory orders
The Pound Euro (GBP/EUR) exchange rate is falling on Thursday after booking minor gains in the previous session. The pair settled +0.02% higher on Wednesday at €1.1879, after trading in a range between €1.1834 – €1.1911. At 05:45 UTC, GBP/EUR trades -0.4% at €1.1832.
The Pound pushed higher yesterday amid an upbeat market mood. There was no data for investors to digest.
Attention is now turning to the Bank of England monetary policy announcement due later today. The British central bank is expected to raise interest rates by 0.25%, in what will be the fourth consecutive meeting of raising interest rates.
Investors will be watching the vote carefully to see if there are any dissenters. Last month there was one dissenter Jon Cunliffe. More dissenters could appear amid rising concerns that the UK economy could be heading towards a recession. More dissenters would give the hike a more dovish tone.
If the central bank did hike rates by 25 basis points this would take the lending rate to 1% the level at which the BoE has previously said that it would consider actively selling the gilts on its balance sheet. However, it has also been said that stable market conditions are a prerequisite.
The euro came under pressure in the previous session after data highlighted areas of concern in the eurozone economy. Retail sales fell by more than expected dropping -0.4% month on month in March after rising 0.4% in February. The fall in fuel sales suggests that consumers are traveling less as petrol prices surge. With inflation at a record high and the cost of the living crisis taking hold, retail sales could come under further pressure.
Today data showed that German factory orders fell by more than expected in March by -4.7%, after falling -0.8% in February. The data is further evidence that the war in Ukraine is weighing on the German and broader European economy.