• Pound (GBP) treads water after two weeks of gains
  • BoE speakers in focus
  • Euro (EUR) is steady ahead of PPI
  • Recession risks in the eurozone were rising

The Pound Euro (GBP/EUR) exchange rate is holding steady at the start of the week and after strong gains last week. The pair rose +0.7 last week, settling at €1.1510 after trading in a range between €1.1331 – €1.1525. At 10:45 UTC, GBP/EUR trades -0.01% at €1.1509.

The pound rose last week despite the Chancellor’s budget pointing to tax hikes and spending cuts over the coming years to plug a £55 billion black hole in public finances and a warning that the UK economy was already in recession.

It wasn’t all bad news. Retail sales data was better than expected, rising 0.6% month on month, ahead of the flat reading expected. Sales rebounded after falling -1.5% in September when shops closed for the Queen’s funeral. Yet, with inflation at a 40-year high and interest rates rising, this is not expected to be the star of a positive trend.

Today there is no high impacting UK economic data. BoE policymaker Cunliffe is due to speak. Investors will be keen to see if the central bank is adopting a less hawkish stance following the Budget, which is expected to slow the UK economy.

The euro fell across the previous week after a stray Russian rocker landed in NATO member Poland and after data confirmed that inflation in the eurozone hit a record high in October of 10.6% year on year.

Today inflation data remains in focus with the German producer price index expected to ease slightly to 41.5% year on year in October from 45.8%. While this is a step in the right direction, it suggests that there is still a very long way to go for inflation to fall.

European Central Bank President Christine Lagarde warned that the central bank could need to raise interest rates by more than initially expected. She also warned that recession risks were rising.