- Pound (GBP) is rising & is set to rise across the week
- UK inflation data is key next week
- Euro (EUR) falls across the week
- Eurozone inflation cooled to 2.4%
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose +0.1% in the previous session, settling on Thursday at €1.1660 and trading in a range between €1.1646 and €1.1663. At 10:00 UTC, GBP/EUR trades -0.1% at €1.1672.
The pound is drifting higher in a quiet session with no fresh UK economic data releases. Investors are focusing attention on next week’s inflation data, which could be the deciding factor in whether the Bank of England cuts interest rates in the June meeting.
This week’s data showed that the UK labour market weakened slightly, with unemployment rising; however, wage growth proved to be sticky. Following the data, Bank of England chief economist Huw Pill still indicated that the Bank of England could be on track to cut rates.
Inflation data is due on Wednesday next week and is expected to show that inflation cooled further towards the Bank of England’s 2% target. A sharp drop in inflation could raise expectations that the central bank will move to cut rates in June, in line with a move that is also expected from the European Central Bank.
The euro is heading lower as investors weigh up the latest inflation figures. Inflation, as measured by the consumer price index, came in at 2.4% year on year in April, in line with the preliminary reading. Meanwhile, core inflation, which discounts for volatile items such as food and fuel, cooled to two point 7%, down from 2.9% year on year in March.
The data is supportive of the view that the European Central Bank will start to cut interest rates next month.
Looking ahead, there is no further economic data for investors to digest today. Attention will turn towards PMI data from next week. The PMI figures, which monitor business activity in the region, will provide further clues as to whether the economy will continue its recovery in the second quarter.
