- Pound (GBP) rises after 2 days of losses
- UK inflation data is due tomorrow
- Euro (EUR) looks to inflation data
- German IFO business climate fell
The Pound Euro (GBP/EUR) exchange is rising after two days of losses. The pair fell -0.30% in the previous session, settling on Monday at €1.1571 and trading in a range between €1.1564 – €1.1641. At 09:00 UTC, GBP/EUR trades +0.14% at €1.1588.
The pound is drifting higher, lifted by an upbeat market mood, as investors await UK inflation data tomorrow.
Inflation is expected to cool slightly to 4.4%, down from 4.6% year on year. However, this is still well over the Bank of England’s 2% target.
Hot inflation would support the BoE’s hawkish stance in the meeting last week.
While the Bank of England left interest rates unchanged as expected, central bank governor Andrew Bailey also reiterated his view that interest rates must stay high for longer in order to tame inflation.
As well as UK inflation, UK GDP and retail sales are also in focus this week.
The data comes after services PMI figures were stronger than expected last week, with the sector rising at a faster rate of 52.7, up from 50.9 in November.
The euro is dropping as investors look ahead to the release of eurozone inflation data today. This is the second reading, so it isn’t usually as market moving at the first reading. The data is expected to confirm the 2.4% year-on-year preliminary figure in November, which was down from 2.9% in October.
The date comes after the German Ifo business climate unexpectedly declined in December and after weaker-than-expected PMI data earlier in the month.
Cooling inflation combined with concerns that the eurozone economy could already be in a recession raise questions over the European Central Bank’s hawkish stance in last week’s meeting.
While the ECB left interest rates on hold as expected at the record 4%, ECB president Christine Lagarde also kicked back on rate cut expectations, saying that the central bank hadn’t even started to discuss rate cuts.
