- Pound (GBP) falls for a second day
- BoE could be more likely to cut rates in August
- Euro (EUR) is rising despite cooling German wholesale inflation
- Political uncertainty still weighs
The Pound Euro (GBP/EUR) exchange rate is rising for a third straight day. The pair rose 0.24% in the previous week, settling on Tuesday at €1.1782 and trading in a range between €1.1708 and €1.1782. At 13:00 UTC, GBP/EUR trades 0.45% at €1.1826.
The pound is falling for a second straight day as the market assesses Bank of England rate cut possibilities.
UK inflation cooled to 2.3% year on year in April, close to the central bank’s 2% target, and unemployment has risen to 4.4%, its highest level in 2 1/2 years. Meanwhile, the UK economy’s recovery stalled in April, with GDP recorded at just 0% as the recovery from last year’s recession ran out of steam.
Still, service sector inflation and wage growth remain strong at around 6%. These are levels that the Bank of England will want to see ease before they start cutting interest rates.
Weighing up the data this week, the market is expecting the Bank of England to cut interest rates twice this year, once in August and another later in the year November.
The euro is heading higher despite German wholesale prices falling again in April by 0.1%, down from 0.3% in April and below the 0.2% decline forecast by economists.
Falling wholesale prices often point to lower consumer price inflation in the coming months.
The data comes after German consumer price inflation (CPI) was upwardly revised yesterday to 2.8%, up from 2.4% year on year.
The upward revision to CPI raises questions over the ECB’s ability to cut interest rates again after the central bank reduced rates by 25 basis points last week.
Meanwhile, ongoing political uncertainty could continue could limit gains in the euro after President Macron called a snap election at the weekend.
