GBP/EUR: Can The Pound Remain Steady After The BoE's Financial Stability Report?
  • Pound (GBP) likely to be muted owing to UK bank holiday
  • BoE rate decision and mini budget due this week
  • Euro (EUR) edges lower after three straight weeks of gains
  • ECB speakers due

The Pound Euro (GBP/EUR) exchange rate is rising at the start of the week after booking steep losses across the previous week. The pair lost -1.2%, settling on Friday at €1.1390 after trading in a range between €1.1381 – €1.1595 across the session. At 05:45 UTC, GBP/EUR trades +0.14% at €1.1409.

The pound fell last week after a week of mixed data. UK unemployment unexpectedly fell to a 48-year low of 3.6%, putting more upward pressure on wages. Meanwhile, inflation unexpectedly ticked lower to 9.9% from 10.1%. However, retail sales fell sharply lower in August -1.6% as the cost of living crisis meant that consumers drastically reined in their spending.

The weak data saw expectations tempered for the Bank of England interest rate announcement this week. The UK central bank is now expected to raise interest rates by 50 basis points rather than 75 basis points previously expected.

Today is likely to see muted movement in the pound owing to the Bank holiday in honour of the Queen’s funeral. However, this week is likely to be a busy week with the BoE interest rate announcement and the mini emergency budget from the new Chancellor, Kwasi Kwerteng.

The euro rose versus the pound last week despite the energy crisis remaining a key challenge for the bloc. However, news that Ukraine has been recapturing lost ground against Russia has buoyed the common currency.

Eurozone inflation data on Friday reaffirmed the initial record 9.1% year-on-year reading. The data comes after the European Central Bank hikes interest rates by 75 basis points earlier in the month. However, ECB officials have since suggested that smaller rate hikes could be more appropriate going forwards.

This week is a relatively quiet week as far as eurozone economic data is concerned. Today there is no high-impacting data to be released. Instead there are several ECB policy makers who will speak and could shed more light on what the central bank plans to do next.