• Pound (GBP) hovers around 5-month high
  • BoE Governor Andrew Bailey to speak
  • Euro (EUR) looks to ECB’s  chief economist Lane
  • German economy expected to remain weak in Q1

The Pound Euro (GBP/EUR) exchange rate is holding steady after a flat week last week. The pair was unchanged last week, settling on Friday at €1.1706 and trading in a range between €1.1661 – €1.1745. At 11:00 UTC, GBP/EUR trades +0.03% at €1.1710.

The pound is holding steady as investors struggle for direction and await fresh catalysts. Last week the pound barely moved against the euro as investors lacked fresh data to digest.

Broadly speaking, the pound has been supported at the current level, which is the highest level since last year after the more hawkish than expected February Bank of England monetary policy meeting.

The meeting brought a rare 3-way split with two policymakers voting to raise interest rates, one voting for a cart, and six members voting to leave rates on hold.

This week sees more data for investors to mull over, which could show a weakening of the UK economy.

UK unemployment figures are due tomorrow, but the main focus will be Wednesday’s inflation data. UK inflation has proved to be very sticky, and if it continues this way, we could see the market push back further on BoE rate cut expectations.

The euro is also holding steady amid a lack of fresh economic data. Several ECB policymakers, including ECB chief economist Philip Lane, are due to speak. His comments will be watched closely for further clues about when the central bank could start cutting interest rates.

His comments come after data on Friday showed that German inflation cooled to a two 1/2-year low at 2.9% year on year, down from 3.7% in December.

While price pressures are easing in Germany, the economy is also showing signs of deterioration, and a survey of Bloomberg economists showed that it expected the German economy to stall in the first three months of 2024 after previously predicting growth of 0.1%.

The downbeat outlook comes after the German economy posted growth in just one quarter of 2023.