GBP/USD: Pound Steady vs. Dollar Ahead of UK Budget
  • Pound (GBP) is falling, extending last week’s losses
  • UK jobs data could support the more dovish BoE tone
  • Euro (EUR) drifts higher amid a lack of fresh data
  • German inflation data is due tomorrow

The Pound Euro (GBP/EUR) exchange rate is falling after losses last week. The pair fell -0.25% in the previous week, settling on Friday at €1.1628 and trading in a range between €1.1601 and €1.1686. At 10:00 UTC, GBP/EUR trades -0.07% at €1.1620.

The pound is shifting lower, extending losses from last week after the Bank of England left interest rates on hold but raised expectations that it could start cutting rates soon.

The vote split at the central bank meeting was more dovish, with Sir David Ramsden voting for a rate cut. Following the meeting, chief economist Huw Pill indicated a growing belief that interest rate cuts could soon be on the horizon.

The more dovish stance from the Bank of England comes after the UK economy expanded  0.6% QoQ in Q1, well ahead of forecasts indicating that the country’s brief recession was over.

Today, there is no major UK economic data. Attention will turn to UK employment data on Tuesday. Expectations are for the UK claimant count to change to show an increasing number of people claiming jobless benefits in April, and the unemployment rate is also expected to tick higher amid signs that the UK jobs market is starting to cool.

Meanwhile, industry data today showed that British employees’ employers expect to raise wages by 4% over the coming months, a similar rate to three months ago. This data suggests that businesses are less willing to take on higher labour costs.

Meanwhile, the euro is drifting higher amid a lack of fresh economic drivers. Broadly speaking, the euro’s upside could be limited as the ECB plans to cut interest rates at the June meeting, barring any surprises.

Attention is turning to German inflation data due tomorrow, which is expected to confirm the preliminary reading that inflation cooled by 2.2% in April. Also, Germans, ZEW economic survey sentiment data is due tomorrow.

Recent sentiment data from the eurozone’s largest economy has been improving. However, factory orders and industrial production data from Germany earlier in the month were weaker than expected, raising concerns that the recovery in the sector could be a long road.