- Pound (GBP) fell last week
- BoE rate decision is due on Thursday
- Euro (EUR) rose last week after the ECB hiked rates
- ECB speakers are in focus
The Pound Euro (GBP/EUR) exchange rate is holding steady after two week’s of losses. The pair fell -0.26% in the previous week, settling on Friday at €1.1616 and trading in a range between €1.1585 – €1.1687. At 07:35 UTC, GBP/EUR trades +0.02% at €1.1618.
The pound extended its losing streak against the euro on the US dollar into a second week last week after several weak data points.
The unemployment rate in the UK ticked higher to 4.3% in the three months to July, and the UK economy saw a loss of 207,000 jobs in the same. Meanwhile, the UK economy also contracted by more than expected, shrinking 0.5% month on month in July. The data has raised concerns of a recession or at least a steep economic downturn in the second half of the year.
Looking ahead, the Bank of England interest rate decision on Thursday is the key focus as policymakers are expected to lift the benchmark rate by 25 basis points to 5.5%. Given that the hike is mostly priced in the language of the policy statement will be crucial for setting expectations for the Bank of England’s future policy path.
The euro gained ground across the previous week after the ECB raised interest rates by 25 basis points to 4% a record high. However, the market is increasingly convinced that this will be the last interest rate hike from the ECB this hiking cycle.
The move from the central bank came as inflation remained over 2.5 times the ECB’s target rate but amid growing signs of an economic slowdown in the region.
Investors will be watching eurozone inflation data and business activity data this week for clues over how well the economy is holding up and for signs over how deep the contraction is expected to be this quarter and next. Today, attention will be on ECB speakers.