- Pound (GBP) rises holds steady ahead of BoE’s Bailey
- UK GDP unexpectedly rose in November
- Euro (EUR) treads water ahead of German inflation data
- Inflation is showing signs of cooling
The Pound Euro (GBP/EUR) exchange rate is holding steady after losses last week. The pair fell 0.62% at the start of the week, settling on Friday at €1.1287, after trading in a range between €1.1215 – €1.1400. At 05:45 UTC, GBP/EUR trades +0.01% at €1.1288.
The pound is holding steady at the start of the week as investors continue to digest better-than-expected economic growth in the UK at the end of last year and ahead of a speech from Bank of England Governor Andrew Bailey.
UK GDP unexpectedly rise 0.1% month on month in November, supported by service sector activity during the World Cup. Analysts had been forecasting a -0.2% contraction. The data reduces the chances of the UK falling into recession in the final quarter of the year, The data also adds pressure on the BoE to raise interest at the coming meeting to tame inflation which remains in double digits.
The markets are pricing in a 57% probability of a 50 basis point rate hike on February 2nd, which would take rates to 4%
BoE Governor Andre Bailey is due to speak later. Investors will be listening closely for clues over the expected future path for interest rates and any comments on the growth trajectory.
The euro was well supported last week amid easing fears of a deep recession in the region. Falling gas prices, China reopening and the rising bets that the Federal Reserve could slow the pace of rate hikes have helped lift the euro.
Today attention turns to the German wholesale inflation data, which is expected to add to evidence that inflation is cooling in the region. The data is expected to show that inflation eased to 13% year on year in December, down from 14.9%. On a monthly basis, German wholesale inflation is expected to slip 1.4%, after falling 0.9% in November.