- Pound (GBP) is falling after two days of gains
- Pound struggles as the market mood sours
- Euro (EUR) rises despite weaker German business morale
- ECB could cut rates again in September
The Pound Euro (GBP/EUR) exchange rate is falling after two days of gains. The pair rose 0.10% in the previous session, settling on Wednesday at €1.1903 and trading in a range between €1.1877 and €1.1917. At 18:00 UTC, GBP/EUR trades -0.16% at €1.1884.
The euro is gaining despite weaker-than-expected German business sentiment. According to data from the Ifo Institute, German business morale deteriorated in July. The index dropped to 87, down from 88.6, defying economists’ expectations of a rise to 88.9. This was the weakest print since February, showing that the German economy is stuck in crisis.
The data follows yesterday’s German PMI data, which showed the economy returning to contraction, dragged lower by manufacturing activity.
The eurozone economy also slowed sharply, and after a week, forecast growth in services and steep falls in manufacturing, particularly in Germany.
Signs of fading business optimum in the eurozone’s largest economy and sluggish eurozone recovery have boosted ECB interest rate cut bets further.
The ECB reduced interest rates by 25 basis points in June, and the market is expecting up to two more rate cuts this year, potentially with another one in September.
The pound is falling in risk-off trade as the global market mood sours and as the market looks ahead to the Bank of England rate decision.
The quiet UK economic calendar today leaves the pound vulnerable to sentiment. The mood across global markets has soured significantly amid weaker earnings from UK US tech giants, which spurred a global tech route and amid ongoing concerns over the health of the Chinese economy.
The market is pricing in around a 45% probability of a rate cut in August. However, a recent poll by Reuters showed that over 80% of economists interviewed last week see the Bank of England cutting its base rates to 5% in the August meeting.
