- Pound (GBP) rises after 3-days of losses
- BoE chief economists supports restrictive rates for now
- Euro (EUR) falls ahead of ECB Lagarde’s speech
- ECB members have supported keep rate hikes on the table
The Pound Euro (GBP/EUR) exchange rate is rising, ending a 3-day losing streak. The pair fell -0.2% in the previous session, settling on Wednesday at €1.1470 and trading in a range between €1.1468 – €1.1503. At 09:00 UTC, GBP/EUR trades +0.18% at €1.1491.
The pound is pushing higher after three days of losses, boosted by hawkish comments from Bank of England chief economist Huw Pill.
Mr Pill said the central bank may need to keep interest rates restrictive to tame inflation back to the BoE’s target 2% level.
His comments at the Institute of Chartered Accountants in England and Wales came after he had said on Monday that expecting the first interest rate cut in August 2024 doesn’t seem unreasonable.
The Bank of England left interest rates unchanged at 5.25% last week, a 15-year high. Meanwhile, inflation remained at 6.7% in September, still over three times the BoE’s target.
UK inflation data next week is expected to show that consumer prices cooled significantly in October after the Offgen energy regulator price cap was lowered.
Meanwhile, UK GDP data is due on Friday and is expected to show that the UK economy contracted -0.1% in the three months to September after rising 0.3% in the three months to August.
Week economic data could fuel bets that the Bank of England will need to cut rates sooner than initially expected, which could pull the pound lower.
The euro has been boosted in recent sessions by hawkish commentary from ECB policymakers.
Yesterday, ECB chief economist Philip Lane warned that he didn’t believe sufficient progress had been made to cool inflation, hinting that more rate hikes may be needed. Meanwhile, Bundesbank president Joachim Nagel and the Irish central bank chief also supported the idea that further rate hikes shouldn’t be ruled out.
Attention now turns to European Central Bank governor Christine Lagarde, who is due to speak and could offer more insight into the future path for interest rates.
Her comments come after the ECB left interest rates on hold in October and hinted that they may be at the end of its rate hiking cycle.
Recent data from the eurozone has pointed to a deteriorating economic backdrop, with the risk of recession in the last quarter of the year rising.
