- Pound (GBP) rises after losses last week
- The Budget will be revealed on Wednesday
- Euro (EUR) slips ahead of the ECB rate decision this week
- No change to policy is expected
The Pound Euro (GBP/EUR) exchange rate is rising after small losses last week. The pair fell -0.34% in the previous week, settling on Friday at €1.1669 and trading in a range between €1.1645 – €1.1720. At 11:00 UTC, GBP/EUR trades +0.07% at €1.1681.
The pound is recovering from small losses last week, broadly a quiet week for UK data.
However, figures on Friday showed that British manufacturers saw falling output in February and shed workers at the fastest rate since the start of the pandemic. With little else for investors to grab onto, the pound fell across the week.
Attention is now turning to Chancellor Hunt’s budget, which will be released on Wednesday. However, Jeremy Hunt has looked to play down speculation about any significant pre-election tax cuts this week. Jeremy Hunt has highlighted the worsening economic outlook as a reason for not going big on tax cuts but has hinted that there will be some help for voters.
The spring budget comes after a shallow recession in 2023, and the economy is only expected to grow very slowly in 2024.
Elsewhere across the week, there is little in the way of high-impacting data. Tomorrow sees the release of the services PMI for February; however, this is the second reading, so it isn’t expected to be as market-moving as the preliminary numbers.
The euro is holding steady ahead of a big week with the European Central Bank set to announce its interest rate decision on Thursday.
ECB is widely expected to leave interest rates unchanged at the record 4% level, but investors will be watching for clues about when the central bank may start cutting interest rates.
In recent speeches, ECB policymakers have said it’s premature to discuss cutting interest rates.
However, inflation cooled further towards the 2% target and now stands at 2.6% in February, and PMI data shows that the economy continued to contract. On the other hand, unemployment fell, highlighting brightness in the labor market, an area that ECB president Christine Lagarde has spoken about previously. She cautioned that a tight labor market could keep wage growth strong and inflationary pressures on
