- Pound (GBP) falls for a third day
- BoE is expected to leave rates unchanged
- Euro (EUR) rises in a quiet session
- ECB speaks in focus.
The Pound Euro (GBP/EUR) exchange rate is falling for a third straight day The pair fell -0.03% in the previous session, settling on Wednesday at €1.1625 and trading in a range between €1.1604 and €1.1633. At 10:00 UTC, GBP/EUR trades -0.03% at €1.1623.
The pound is falling for a third straight day with all eyes on the Bank of England interest rate decision at 11 GMT. This will be followed by a press conference by BoE Governor Andrew Bailey.
The central bank is widely expected to keep interest rates at 5.25% but could start to prepare for a rate cut in the coming months.
Inflation in the UK was 3.2% YoY in March and is expected to continue easing towards the BoE’s target of 2% in April.
The market will be watching to see if the central bank lowers its inflation forecasts and adopts a more dovish forward guidance.
In the March Bank of England meeting, the vote split was 8 to 1. This vote split could become more dovish. Several policymakers, including Sir David Ramsden, have adopted a more dovish stance in recent speeches. A more dovish rate vote split of two or more could point to a sooner rate cut from the central bank.
The market is currently pricing in a 40% probability of a June rate cut and is fully pricing in a 25 basis point rate cut for August.
The euro is rising against the pound but struggling against the USD in a quiet session. No major eurozone economic data will be released. Instead, attention will be on ECB speakers, who could provide further clues about the outlook for ECB interest rates.
The ECB is expected to start cutting rates in June. However, what happens after that remains unclear.
Recent data from the eurozone has been encouraging, although Germany’s manufacturing sector is still struggling to recover.
