- Pound (GBP) rises after losses yesterday
- Manufacturing PMI contracted
- Euro (EUR) is falling amid a quiet calendar
- Eurozone growth & inflation beat forecasts this week
The Pound Euro (GBP/EUR) exchange rate is rising modestly after losses yesterday. The pair fell 0.76% in the previous session, settling on Thursday at €1.1850 and trading in a range between €1.1834 and €1.1970. At 16:00 UTC, GBP/EUR trades 0.75% at €1.1939.
The pound is recovering on Friday, but we’re still on track to fall across the week as the market continued to digest labor’s budget unveiled earlier in the week. While the budget is considered to be inflationary and the market has lowered Bank of England rate cut expectations, the pound is still on track for declines across the weak against the euro and the dollar. This suggests that investors aren’t convinced that the budget will boost growth sufficiently.
Data today showed that UK manufacturing activity shrunk for the first time since April. The UK manufacturing PMI fell to 49.9 down from 51.5. This was below the level 50 that separates expansion from contraction.
Looking ahead, the Bank of England is expected to cut rates by 25 basis points next week, taking the main rate from 5% to 4.75% on Thursday. Following the budget, the market is no longer expecting a rate cut in December, and now it is pricing in just 100 basis points worth of cuts before August next year, down from 120.
The Ray is slipping today as it drifts lower due to a lack of fresh catalysts. However, the euro has risen across the week after stronger-than-expected GDP data and hotter-than-expected inflation data. Eurozone GDP was 0.4%, double the 0.2% forecast, and inflation rose from 1.7% to 2%.
ECB president Christine Lagarde stated that inflation is expected to persistently hit the ECB’s 2% target in 2025.
The ECB is expected to cut rates by 25 basis points in the December meeting.
