- Pound (GBP) falls after losses last week
- UK CPI & BoE rate decisions are due this week
- Euro (EUR) rises ahead of inflation figures
- Eurozone CPI is expected to cool to 2.6% YoY in February
The Pound Euro (GBP/EUR) exchange rate fell on Monday after losses last week. The pair fell -0.46% in the previous week, settling on Friday at €1.1697 and trading in a range between €1.1668 to €1.1762. At 10:00 UTC, GBP/EUR trades -0.04% at €1.1687.
The pound is heading lower incautious trade ahead of a busy week with fresh CPI inflation data due on Wednesday, which will be the first since the spring budget and the Bank of England interest rate decision on Thursday.
The inflation data is expected to show that consumer prices cooled in February to 3.6% year on year, down from 4% recorded in January. The data comes after Chancellor Jeremy Hunt made the bold forecast that inflation would reach 2% in the coming months, which is ahead of the Bank of England’s own forecasts.
The central bank is expected to leave interest rates on hold at a 15-year high of 5.25% on Thursday. Given that inflation is still well above the 2% target, the bank is unlikely to give too many clues about when it might start cutting interest rates.
Meanwhile, the euro is heading higher ahead of eurozone inflation data. This is the second reading for February and so it is not expected to be as market-moving as the preliminary inflation data.
Economists expect inflation to confirm that it cooled to 2.6% year on year in February, down from 2.8%.
Meanwhile, core inflation is expected to confirm the cooling to 3.1%, down from 3.3% year over year in January.
The data comes as the head of the Finnish central bank, Olli Rehn, confirmed that the ECB has started discussing cutting interest rates. He added that he sees a scenario emerging where several rate cuts could be needed in 2024.
The ECB is one of the few major central banks not to have an interest rate decision this week. Two weeks ago, the European Central Bank left interest rates on hold at 4%, and President Christine Lagarde signaled to a June rate cut.
