- Pound (GBP) rises ahead of BoE’s Bailey
- UK economic calendar is quiet
- Euro (EUR) falls ahead of German inflation data
- ECB Lagarde was hawkish yesterday
The Pound Euro (GBP/EUR) exchange rate is rising after three days of decline. The pair fell 0.57% yesterday, settling at €1.1562 after trading in a range between €1.1526 – €1.1646. At 08:25 UTC, GBP/EUR trades +0.4% at €1.1609.
The pound is pushing higher boosted by the risk on market mood mid hopes that the protests in China could bring about a sooner end to the zero-COVID measures.
Today there is no high impacting UK economic data, instead attention will be on the Bank of England Governor Andrew Bailey who is due to testify before the Lords Economic Committee. Investors will listen to his tone carefully for clues about the direction of interest rates. The market is pricing in an 85% probability that the BoE will hike rates by 50 basis points in the December meeting after a 75 basis point hike in November.
The euro is falling after several days of gains and as investors continue digesting hawkish comments from European Central Bank President Christine Lagarde.
Lagarde said that it was possible that inflation still hadn’t peaked, saying that the ECB would continue raising interest rates. She insisted there was still a way to go to raise interest rates.
Christine Lagarde’s comments come after other ECB members, such as Deputy Luis De Guinods, believe that inflation has already peaked. The differing opinions mean there will likely be a lively debate when the ECB meets in December to discuss interest rate hikes. There appears to be support for both a 50 basis point hike and a 75 basis point hike.
Attention is now turning to German inflation, which is expected to cool slightly to 11.3% year on year in November, down from a record high of 11.6% in October.
Eurozone confidence data is also in focus. This is the second reading, so it may not be so market-moving. It is expected to confirm the -23.9 level.