- Pound (GBP) falls, extending losses last week
- Inflation & GDP data are due this week
- Euro (EUR) rises ahead of German business data
- ECB pushed back on rate cut bets
The Pound Euro (GBP/EUR) exchange rate is falling after losses last week. The pair fell -0.20% in the previous week, settling on Friday at €1.1632 and trading in a range between €1.1579 – €1.1701. At 09:00 UTC, GBP/EUR trades -0.20% at €1.1615.
The pound fell last week after the Bank of England left the interest rate on hold at 5.25% and reiterated its view that interest rates need to stay higher for longer.
While there is no high-impacting UK economic data due today, there are several data points to watch this week, including the final Q3 GDP report and UK inflation data.
Inflation, as measured by the consumer price index, has been moving lower over the past few months, dropping to 4.6% year on year in October. Economists are expecting inflation to cool further to 4.4% year on year in November.
Cooler than forecast inflation could increase pressure on the central bank to acknowledge that interest rates will move lower next year, which would be in contrast to Last week’s Monetary Policy Committee meeting.
Meanwhile, GDP is expected to confirm 0% growth quarter on quarter in Q3 after 0.2% growth recorded in Q2.
The data comes after PMI data on Friday shade that the UK service sector grew at a much faster pace than expected in December, rising to 52.7 up from 50.9 in November.
The euro is rising, adding to gains in the previous week after the European Central Bank pushed back on expectations that it would be cutting interest rates anytime soon.
The euro managed to rise last week even though the business activity data showed that the region most likely entered recession in the final quarter of the year.
The composite PMI, which is often considered a good gauge for business activity, unexpectedly fell to 47 from 47.6 in November, missing expectations of a rise to 48.
Attention will now turn to German Ifo business confidence data, which is expected to tick higher to 87.7 up from 87.3. The increase in business confidence comes amid expectations that the ECB will not be hiking interest rates any further and could suggest that the recent downturn in the economy is bottoming out.
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