• Pound (GBP) falls for a second straight day
  • BoE Bailey appears before the Treasury Select Committee
  • Euro (EUR) rises as ECB rate cuts are reined in
  • ECB policymaker De Guindos to speak

The Pound Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell -0.12% in the previous session, settling on Tuesday at €1.1623 and trading in a range between €1.1615 – €1.1649. At 09:00 UTC, GBP/EUR trades -0.04% at €1.1621.

The pound is heading lower ahead of a speech by Bank of England governor Andrew Bailey. Bailey is due to appear before the UK Treasury Select Committee, where any comments regarding the outlook for inflation or interest rates could influence the sterling.

His appearance comes as investors rein in Bank of England rate cut bets. The market is now expecting the first rate cut from the central bank in the second quarter of this year, most likely in May.

Forecasts are for around 116 basis points worth of cuts across the year. This is down considerably from the five lots of 25 basis point cuts that the market had been pricing in towards the end of last year.

The economic calendar for the UK is relatively quiet this week, with the major focus being on Friday’s GDP data, which is expected to show that the UK economy contracted again in the three months to November, raising the likelihood of a mild recession at the end of 2023.

The euro is inching higher for a second straight day despite mixed data from the region.

Yesterday, figures showed that German industrial production unexpectedly declined in November, marking the seventh straight month of falling output, which raises the likelihood that the eurozone’s largest economy tipped into recession at the end of 2023.

Meanwhile, eurozone unemployment has lowered to 6.4%, marking a record low, which could make ECB policymakers cautious about cutting interest rates. The market is raining in ECB rate cuts, keeping the euro supported.

There is no high-impacting eurozone economic data due today. The focus will be on the ECB policymaker Luis de Guindos, with any comments regarding the outlook for inflation or interest rates likely to move the euro.