GBP/EUR: Pound Rises vs Euro Despite Record-Low German Unemployment
  • Pound (GBP) rises, adding to last week’s gains
  • Optimism over the UK economic outlook is helping the pound
  • Euro (EUR) falls despite consumer confidence improving
  • German inflation is expected to rise to 2.3% YoY

The Pound Euro (GBP/EUR) exchange rate is rising for a sixth straight day. The pair rose 0.6% in the previous week, settling on Friday at €1.1676 and trading in a range between €1.1565 and €1.1696. At 10:00 UTC, GBP/EUR trades +0.13% at €1.1691.

The pound is rising, adding to gains last week despite expectations that the Bank of England could start cutting interest rates as soon as August.

The pound is rising on optimism that the recession experience to the end of 2023 will be short-lived and shallow.

PMI data last week was encouraging, with UK business activity expanding at the fastest pace in 11 months.

The focus is also on when the Bank of England could start to cut rates as it faces growing pressure from the ruling Tory party to cut rates and boost the feel-good factor ahead of expected elections this year.

Chancellor Jeremy Hunt has repeatedly spoken of the prospect of a rate cut, despite it really being off-limits for politicians to discuss when they anticipate one.

Pressure comes as the Bank of England Monetary Policy Committee continues to assess when the best moment to cut interest rates will be. Dave Ramsden, the vice governor, and Huw Pill, the chief economist at the Bank of England base, had different assessments earlier in the month over persistent inflation.

The euro is under pressure after eurozone consumer confidence improved in April to -14.7 up from negative 14.9. However, economic confidence was weaker than expected at 95.6 versus 96.7 expected.

Attention is now turning to German inflation data, which is expected to show that inflation in the eurozone’s largest economy ticked higher in March to 2.3% year on year, up from 2.2%.

The slight increase in CPI is unlikely to derail the ECB’s planned rate cut in June.

The data comes after several data points out of Germany last week pointed to the economy recovering. Consumer confidence and business income optimism brightened suggesting that the downturn in Germany could be short-lived.