- Pound (GBP) rises for a third straight day
- UK CPI eased to 3.4% YoY in February from 4% in Jan.
- Euro (EUR) falls as ECB President looks to a June rate cut
- Eurozone consumer confidence data is due
The Pound Euro (GBP/EUR) exchange rate rises for a third straight day. The pair rose 0.02% in the previous session, settling on Tuesday at €1.1705 and trading in a range between €1.1685 to €1.1723. At 10:00 UTC, GBP/EUR trades +0.06% at €1.1712.
The pound is rising against the euro but falling against the US dollar after UK inflation data cooled more than analysts had expected.
Figures from the Office of National Statistics showed that inflation, as measured by the consumer price index, eased to 3.4% year over year in February, down from 4% in January and below the forecast of 3.5%. This also marks the lowest level for inflation in 2 1/2 years and will likely keep the Bank of England on track to cut interest rates later this year.
The data shows that inflation is trending lower and could be on track to cool to the Bank of England’s 2% target in April.
The data comes ahead of the Bank of England’s interest rate decision tomorrow. The central bank is expected to keep interest rates on hold at a 15-year high of 5.25%.
Bank of England governor Andrew Bailey has said he wants to see more progress towards the 2% target before cutting interest rates.
The market is currently pricing in the first 25 basis point rate cut from the central bank in the August meeting.
The euro fell following comments from European Central Bank president Christine Lagarde, who confirmed that inflation was showing signs of cooling toward the central bank’s target.
Her comments come after wage data yesterday showed that wage growth eased to 3.1% in the final quarter of last year, down from 5.2% in the third quarter of 2023.
In the last ECB meeting, Christine Lagarde cautioned that strong wage growth was a reason to hold back on cutting interest rates. However, with wage growth cooling, this appears to be less of a problem, opening the door to a potential rate cut from the central bank in June.
Looking ahead, attention will turn to eurozone consumer confidence data, which is expected to improve slightly in March to -15, up from -15.5 in February.
