- Pound (GBP) extends Sunak-inspired rally
- BoE rate decision is due this week
- Euro (EUR) despite ECB rate hike last week
- Eurozone GDP and inflation data due
The Pound Euro (GBP/EUR) exchange rate is rising after strong gains last week. The pair rose 1.6% across the week, settling at €1.1648 after trading in a range between €1.1408 – €1.1668 across the week. At 05:45 UTC, GBP/EUR trades at 0.06% at €1.1654.
The pound soared last week, helped higher by a relief rally after Rishi Sunak won the contest and became the British Prime Minister, replacing Liz Truss. Rishi Sunak is widely considered a calming force in the markets after the chaos of the previous government.
The pound pushed higher even after Sunak announced that the budget would be pushed back to 17th November and despite reports circulating that the Chancellor will look to raise taxes and cut spending to the tune of £50 billion.
Today there is no high-impacting UK economic data due to be released. Looking ahead, the Bank of England interest rate decision will be the key focus this week. The BoE has been hiking rates at a steady pace of 50 basis points in recent meetings. This could be ramped up to 75 basis points this week. A more hawkish BoE could lift the pound.
The euro fell against the pound last week but rose against the USD after the ECB raised interest rates by 75 basis points, in line with forecasts, and said that there were more hikes to come. Data from Germany also showed that the economy grew at a faster pace than feared, avoiding a recession in Q3.
Today the focus is on eurozone GDP growth for the July to September period, which is expected to rise 0.2% quarter on quarter, down from 0.8% in the second quarter but defying expectations of a recession.
Eurozone inflation will also be under the spotlight and is expected to cool slightly to 9.8% year on year, down from 9.9%. Hot inflation could help build expectations for another 75 basis point hike at the next ECB meeting.
