GBP/EUR: Pound Falls vs Euro Amidst UK Politics
  • Pound (GBP) rebounds after steep losses
  • The Chancellor and BoE appear more aligned
  • Euro (EUR) falls after strong gains on Friday
  • Italian CPI data is due

The Pound Euro (GBP/EUR) exchange rate is rising, paring losses from Friday. The pair fell 0.84% at the end of last week, settling at €1.1488 after trading in a range between €1.1466 – €1.1616 across the session. At 05:45 UTC, GBP/EUR trades +0.35% at €1.1525.

The pound fell on Friday after Prime Minister Liz Truss sacked Chancellor Kwasi Kwarteng. She then made a second U-turn on the mini-budget, rolling back the corporation tax cut. However, the market didn’t think she went far enough, and still leaves a huge black hole of almost £30 billion in unfunded tax cuts.

Over the weekend, the newly appointed Chancellor Jeremy Hunt attempted to soothe the markets and also had a productive meeting with the Bank of England Governor Andrew Bailey, where both agreed on the importance of fiscal sustainability.

This appears to be enough to shore up the markets for now as Hunt attempts to bring some creditability back to the UK economic outlook.  Confidence in the UK economy has been hit hard, and it will take time to repair. However, the BoE supporting the Chancellor appears to be a step in the right direction.

There is no high-impacting UK economic data due to be released today. Later in the week, UK inflation data will be in focus and is expected to rise again.

The euro rose on Friday after data showed that German wholesale inflation continued rising in September. Wholesale inflation jumped to 19.9% year on year, up from 18.4% annually in August. The data, which is often considered a lead indicator for consumer prices, suggests that CPI inflation will continue rising.

Today there is no high-impacting eurozone data due to be released. Mid-tier Italian inflation data could catch the eye of investors. It is expected to confirm the 9.5% year-on-year preliminary reading.

Looking ahead, on Tuesday, German ZEW economic sentiment data is due to be released.