- Pound (GBP) rises for a 6th straight day
- BoE commentary is in focus
- Euro (EUR) falls as inflation looks set to cool
- German retail sales rise 1.1%
The Pound Euro (GBP/EUR) exchange rate is rising for a sixth straight day. The pair rose +0.21% in the previous session, settling on Wednesday at €1.1569 and trading in a range between €1.1542 – €1.1581. At 09:00 UTC, GBP/EUR trades +0.24% at €1.1592.
The euro is falling against the pound, extending losses from the previous session when weaker-than-expected inflation data from Germany and Spain pulled the euro lower.
German inflation fell by more than expected to 2.3% year on year in November, and Spanish inflation cooled to 3.2%, raising questions about whether the ECB may soon need to think about cutting interest rates.
The data comes ahead of the eurozone inflation figures which are expected to show that consumer prices eased to 2.7% in November down from 2.9%. However, the weaker-than-forecast inflation figures from Germany and Spain suggest that eurozone inflation could also come in below forecasts. Investment bank Goldman Sachs believes that inflation will be 2.5%.
Cooling inflation raises the expectation that the European Central Bank has ended its interest rate hiking cycle and that the next move it makes will be an interest rate cut.
The ECB is expected to cut interest rates in June next year. However, cooler-than-forecast inflation could prompt PCB to cut rates sooner.
Separately, German retail sales came in ahead of forecasts, growing 1.1% month on month in October. This was ahead of the 0.4% increase expected and also up from -0.8% in the previous month. The data is the latest in a series of stronger-than-expected figures from Germany, fueling optimism that the downturn in the economy has bottomed out.
The pound is extending gains, with the Bank of England remaining in the spotlight for another session. Monetary Policy Committee member Megan Greene is due to speak. Any comments relating to monetary policy, inflation, or the economic outlook could influence the value of the pound.
Her comments come after Bank of England governor Andrew Bailey spoke earlier in the week and said that he would do whatever was necessary to lower UK inflation back to the central bank’s 2% target.
Bailey’s continued pushing back on rate cut expectations, which has been supporting the pound which has gained against the US dollar as well as the euro.