GBP/EUR: UK Politics & German Sentiment Data To Drive Movement
  • Pound (GBP) slips after 34-days of gains
  • IFS warns over a potential tax cut
  • Euro (EUR) looks to the ECB rate decision
  • German IFO business climate data is due

The Pound Euro (GBP/EUR) exchange rate is falling after three days of losses. The pair rose +0.01% in the previous session, settling on Wednesday at €1.1687 and trading in a range between €1.1662 – €1.1717. At 09:00 UTC, GBP/EUR trades -0.1% at €1.1678.

The euro is rising as investors look to the ECB interest rate decision to later today.

Economists expect the ECB to leave interest rates unchanged at 4%, a record high. ECB President Christine Lagarde is also likely to continue pushing back against market expectations of aggressive monetary policy easing this spring despite a weak economic outlook and cooling inflation.

The central bank ended its rate hiking cycle in September but has insisted it’s still too early to consider cutting interest rates as unemployment is at a record low and amid concerns over supply chain disruptions in the Middle East.

Meanwhile, the market believes the ECB has got it wrong and will be forced to cut interest rates sooner. Given the gloomy economic outlook

The meeting comes after PMI data yesterday showed that business activity in the eurozone contracted for an eighth straight month, raising the likelihood of a prolonged recession in the region. A hawkish-sounding ECB could help to lift the euro against its major peers.

As well as the ECB rate decision, German Ifo business climate data will be in focus and is expected to tick higher.

The pound is edging lower after several sessions of gains amid a quiet economic calendar and after a report from the Institute of Fiscal Studies, which raised concerns over a potential tax cut in March.

The IFS warned that Britain’s next government would face the toughest challenge since the 1950s to bring down the high debt burden amid slow economic growth and difficult spending choices.

The report comes after g data earlier in the week showed that the government may have room to cut interest rates in the spring budget to boost popularity at the polls for an election later in the year.