pound-sterling-gbp-coin - GBP
  • Pound (GBP) rises ahead of CPI & BoE tomorrow
  • CPI expected to cool moderately to 9.8%
  • Euro (EUR) rose yesterday as banking crisis calmed
  • ECB Lagarde to speak

The Pound Euro (GBP/EUR) exchange rate is rising after steep losses in the previous session. The pair fell 0.95% yesterday, settling on Tuesday at €1.1339, after trading in a range between €1.1310 – €1.1458. At 05:45 UTC, GBP/EUR trades +0.11% at €1.1351.

The pound fell sharply against the euro and the US dollar yesterday as attention turns towards the Bank of England interest rate decision on Thursday. The central bank is between a rock and a hard place as inflation in the UK remains elevated and as financial stability risks have emerged over the past 10 days.

A 25 basis point rate hike still looks likely, although the dovish members of the MPC will be vocal. There is a good chance that the Bank of England will hike in March before putting the hiking cycle on pause.

Prior to Thursday’s interest rate decision, UK inflation data is expected to be released today and is forecast to edge very slowly lower to 9.9% year on year in February, down from 10.1% in March. Meanwhile, core inflation, which strips out the more volatile items such as food and fuel is expected to tick blow up to 5.7% Iranian, down from 5.8%.

The data could suggest that you can inflation is sticky. However, expectations are for UK inflation to fall to 2.9% by the end of the year.

The euro rose sharply across the board on Tuesday as UBS acquisition of Credit Suisse appeared to draw a line under the banking crisis and fears of contagion within the European banking sector.

Investors shrugged off weaker-than-expected German ZEW economic sentiment, which tumbled to 13 in March, down from 28.1 and missing forecasts of 17.1. However, this was mainly due to the banking crisis, which appears to be calming.

Today there is no high impacting eurozone economic data, instead, attention will be on ECB President Christine Lagarde, who is due to speak again.