- Pound (GBP) rises after losses yesterday
- BoE is expected to leave rates on hold
- Euro (EUR) falls despite improving PMIs
- Composite PMI rose to 49.9
The Pound Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell -0.03% in the previous session, settling on Wednesday at €1.1701 and trading in a range between €1.1695 and €1.1715. At 10:00 UTC, GBP/EUR trades +0.14% at €1.1718.
The pound is rising ahead of the Bank of England interest rate decision at 12:00 GMT today.
The Bank of England is expected to leave interest rates unchanged at a 15 year high of 5.25%.
The meeting comes after inflation data yesterday showed that consumer prices cooled by a little more than expected to 3.4% year on year in February, down from 4% in January, however, service sector inflation remains sticky at 6.1%, an area that the Bank of England watches closely.
With no press conference from Bank of England governor Andrew Bailey today following the meeting attention will be on the vote split and the tone of the statement.
In the last meeting, there was a three-way vote split. There are rising expectations that the two policymakers who voted to hike interest rates in the previous meeting could vote to leave right on hold this meeting, making the vote split less hawkish, which could pull the pound lower.
The market is currently pricing in almost three 25-basis point rate cuts this year, with the first-rate cut fully priced in for August. The market is pricing in a 50/50 probability of the central bank hiking interest rates in Jane.
The euro is falling despite improving business activity data in the region, suggesting that the downturn could have bottomed out.
The composite PMI, which is a good gauge of business activity, rose to 49.9 in March, up from 49.2 in February. The move was mainly driven by an acceleration in the growth of the services sector, with the PMI rising to 51.5, up from 50.5 in the previous month; the level 50 separates expansion from contraction. However, it’s worth noticing that the manufacturing sector contracted at a slightly faster pace too, falling to 45.7 from 46.5.
