- Pound (GBP) rises for a second straight day
- BoE’s Ramsden pushed back on rate cuts
- Euro (EUR) falls with consumer confidence data in focus
- German consumer confidence rose modestly
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose 0.05% in the previous session, settling on Tuesday at €1.1692 and trading in a range between €1.1683 – €1.1699. At 11:00 UTC, GBP/EUR trades +0.05% at €1.1698.
The euro is inching lower ahead of eurozone consumer confidence data, which is expected to show that consumer sentiment improved slightly to -15.5 in February, up from -16.1 in January.
The data comes after consumer confidence in Germany perked up slightly, rising to -29 in line with expectations and up from the 11-month low of -29.6.
The improvement in sentiment came mainly due to income expectations rising to more than a two-year high; however fast, recovering consumer spending is not looking likely, particularly given the ongoing increasing cost of living and the dampened economic outlook for the rest of the year.
Germany is dealing with a multitude of economic concerns, and the government has slashed the GDP forecast for 2024 to just 0.2%, down from 1.3% previously.
Looking ahead, the main focus this week will be on Friday’s inflation data which is expected to show that inflation cooled further to 2.5% year on year, taking it closer to the ECB’s 2% target.
The pound continues to drift higher, supported by the view that the Bank of England will start cutting interest rates after the ECB owing to sticky inflation and an expected recovery from recession in the first quarter of this year.
Bank of England’s deputy governor, Dave Ramsden, said yesterday that inflation pressures are still too high, and he would like to see more evidence that inflationary pressures are easing before he considers cutting interest rates.
He highlighted services inflation as a key indicator to monitor alongside wage growth and tightness in the labour market. He said that service sector inflation remains at levels that are well above what is consistent with the 2% inflation target.
Dave Ramsden was one of the six MPC members who voted to keep interest rates unchanged at 5.25% at the Bank of England’s last meeting.
