- Pound (GBP) looks to BoE’s Andrew Bailey
- High rates for longer keep GBP supported
- Euro (EUR) falls for a second day
- Eurozone retail sales rose just 0.1% MoM
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.06% in the previous session, settling on Tuesday at €1.1660 and trading in a range between €1.1641 – €1.1688. At 09:00 UTC, GBP/EUR trades +0.12% at €1.1677.
The pound is pushing higher for the second straight day and trades at a three-month high, boosted by bets that the Bank of England could keep interest rates unchanged full the first half of 2024.
Last week, Bank of England Governor Andrew Bailey said that getting UK CPI Back down to the central bank’s 2% target will be hard work, which suggests that the central BoE is in no rush to reduce interest rates. Andrew Bailey is due to speak again shortly, and his comments could influence the pound.
Currently, the market sees a 60% probability of the BoE keeping interest rates at 5.25% until June next.
The markets pushed back rate cut expectations after yesterday’s services PMI surprised coming in above 50 to its highest level in four months. The PMI rose to 50.9 in November, which was higher than economists had forecast and up from 49.5 in October. A reading above 50 indicates that a sector is growing.
The euro continues under pressure after retail sales rose by less than expected in October. Retail sales rose 0.1% after falling 0.1% in September month on month. Economists had forecast a 0.2% monthly rise. Weak retail sales highlight the pressure that households are under after the ECB’s aggressive interest rate hiking cycle.
However, there are growing expectations that the ECB has ended is done with hiking rates. These expectations were confirmed by ECB policy maker and known hawk Isabel Schnabel, who yesterday said that the central bank was likely done hiking rates given the significant cooling in inflation.
Inflation in the eurozone cooled to 2.4% year on year in October, which is close to the ECB target 2% level.
