- Pound (GBP) rises for a second straight day
- The first BoE rate cut has been pushed back to September
- Euro (EUR) looks to ECB Lagarde’s speech
- German IFO business climate rise to 87.3
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.18% in the previous session, settling on Thursday at €1.1491 and trading in a range between €1.1458 – €1.1513. At 09:00 UTC, GBP/EUR trades +0.12% at €1.1505. The pair is set to rise 0.77% across the week after two weeks of losses.
The pound is rising and is set to book gains across the week as investors push back expectations of the first Bank of England interest rate cut.
The money markets have reined in expectations that the Bank of England will cut rates next year after strong UK business activity data showed signs of persistent inflation.
The markets are now betting that the central bank will reduce rates by 60 basis points across next year, which means two rate cuts are being fully priced in. The first cut is fully priced in for September.
This is a substantial change from last week when traders were pricing in almost a 1% rate cut in 2024 after retail sales unexpectedly fell, fuelling fears of a recession.
However, services PMI data yesterday showed that the sector expanded again in November after three months of declines.
Today, the UK economic calendar is much quieter, with investors just digesting consumer confidence data. The figures showed that sentiment jumped in November to -24, up from October’s three-month low of -30 and ahead of the -28 forecast. However, the mood remains a long way off pre-COVID levels.
Meanwhile, the euro is edging lower after German GDP data showed that the economy contracted in the third quarter. Yet the eurozone’s largest economy shrank by 0.1% quarter on quarter after rising 0.1% in Q2.
Meanwhile, the German IFO business sentiment improved for a second straight month, rising to 87.3 up from 86.9 but missing forecasts of 87.5.
The data suggests that confidence is rising albeit slowly, allowing cautious optimism to prevail among German businesses.
Looking ahead, attention will now turn to ECB president Christine Lagarde, who is due to speak shortly. In recent speeches here suggested that it’s too early to consider cutting interest rates. However, the minutes of the ECB meeting did highlight concerns over growth in the region.
