- Pound (GBP) rises to a 5-month high
- BoE rate decision is Thursday
- Euro (EUR) struggles on dovish ECB expectations
- Eurozone GDP, CPI data this week
The Pound Euro (GBP/EUR) exchange is rising, extending gains from the previous week. The pair rose 0.4% last week, settling on Friday at €1.1710 and trading in a range between €1.1648 – €1.1738. At 16:00 UTC, GBP/EUR trades +0.33% at €1.1733.
The pound is pushing higher at the start of last week, extending gains from the previous week as investors look ahead to the Bank of England interest rate decision on Thursday.
The market is becoming increasingly convinced that the Bank of England could be more cautious about starting to cut interest rates compared to the European Central Bank or the Federal Reserve.
This comes as UK inflation remains sticky around the 4% level, and after the Service sector, PMI came in stronger than expected in January, jumping to 53.8, up from 53.2.
The central bank meeting comes as the British public’s expectations for inflation, particularly in the short term, have cooled.
Public expectations for inflation in the 12 months fell from 3.9% in November to 3.5% in December. This was down from 4.2% in October according to a survey by Citigroup and market research.
For five to 10 years ahead, expectations cooled by less, dropping by 0.1% to 3.4% from 3.5%, which suggests that there could be some lingering risks.
Meanwhile, other data showed that UK job vacancies fell by the most in three years in December, a sign that the labor market is cool.
Advertised vacancies declined by 6.95% in December, the largest drop since June 2020, and early data suggests January will see a similar-sized fall.
The euro has fallen across the previous week and trades under pressure as the European Central Bank is expected to start cutting rates before the Bank of England despite ECB policy makers attempting to push back on rate cut expectations This week is a busy week for the euro with investors looking towards GDP data and inflation figures for further clues on how well the eurozone economy is holding up and when the ECB could start to cut rates.