- Pound (GBP) falls for a fourth straight session
- Tory leadership race in focus
- Euro (EUR) rises but trades flat across the week.
- Draghi’s resignation is rejected
The Pound Euro (GBP/EUR) exchange rate is edging lower for a fourth straight session. The pair lost -0.13% on Thursday, settling at €1.1798, after trading in a range between €1.1756 – €1.1850. At 08:45 UTC, GBP/EUR trades -0.03% at €1.1794.
The pound edged lower in the previous session in a quiet session for UK economic data. Instead, the focus was on a speech by Bank of England Deputy Governor Dave Ramsden, who, despite his hawkish tone, failed to lift the pound. Ramsden said that the BoE would need to continue acting to get rates under control. Rates, he said, were very likely to continue rising.
The BoE has raised interest rates five times since December to prevent inflation from becoming entrenched.
Today the pound continues to trade under pressure with a quiet economic calendar; the focus will be on the Conservative leadership race. The five remaining contestants will go head to head in the first of three televised debates. So far, there is no clear front runner.
The euro pushed higher versus the pound in the previous session after German wholesale inflation came in higher than expected. German producer prices were 21.2% year on year in June, down slightly from 22.9% but ahead of the expected level of 20.4%.
Producer prices are often considered a lead indicator for consumer price inflation. The still-elevated level of PPI suggests that consumer price inflation will remain high.
Today the euro is holding onto recent gains after the Italian President rejected Prime Minister Draghi’s resignation. Draghi had offered his resignation after the 5 Star Movement refused to back a vote of confidence in his government.
The rejection of the resignation buys Draghi some time to try to come to a compromise with the 5 Star Movement. It avoids the outcome most feared by the markets, which is Draghi’s departure and an early election.