- Pound (GBP) is rising amid a lack of fresh catalysts
- GBP is a top major performer so far this year.
- Euro (EUR) falls after ECB commentary
- EZ consumer confidence data is due
The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose 0.02% in the previous session, settling on Monday at €1.1875 and trading in a range between €1.1860 and €1.1885. At 16:00 UTC, GBP/EUR trades 0.19% at €1.1898.
The euro is drifting lower against the pound after comments from ECB policymakers and ahead of eurozone consumer confidence data.
ECB policymaker De Guindos said that inflation is cooling in line with forecasts. He added that there are also signs that wage growth is starting to slow.
A tight labour market, with unemployment at a record low and elevated wage growth, has been one of the hurdles for the ECB, preventing it from cutting interest rates further.
However, with wage growth starting to slow, the ECB could be prepared to start cutting interest rates again in the September meeting.
De Guindos’ comments came after Peter Kazimir, an ECB official, yesterday said that the market is not misplaced in its pricing of rate cuts. The market is currently pricing in two more rate cuts this year; the first is expected in September, and another potentially in December.
Attention is also turning to eurozone consumer confidence, which is expected to improve to -13.2 in June, up from -14. The slight brightening of morale comes as the ECB reduced interest rates by 25 basis points that month.
The pound is rising against the euro but struggling against the US dollar due to a lack of fresh catalysts to drive the price.
The pound has performed well versus its major peers this year as stickier-than-expected UK service sector inflation has caused the Bank of England to postpone interest rate cuts.
Meanwhile, the Labour Party’s landslide election victory at the start of July has also boosted optimism among some investors that greater political stability could help support the UK economy.
The next Bank of England meeting is on August 1st, and this will be the first real opportunity investors have since the UK elections to hear what the bank is actually thinking.
