- Pound (GBP) rises and is set to rise across the week
- BoE cut rates by 25bps but warned over sticky inflation
- Euro (EUR) is falling across the week
- Euro falls on trade tariff fears
The Pound Euro (GBP/EUR) exchange rate is rising modestly, adding to yesterday’s gains. The pair rose 0.12% in the previous session, settling on Thursday at €1.2017 and trading in a range between €1985 and €1.2038. At 11:00 UTC, GBP/EUR trades 0.02% at €1.2021.
The pound is rising, albeit be it modestly, marking the fourth straight day of gains after the Bank of England cut interest rates but warned over sticky inflation.
In line with forecasts, the Bank of England cut interest rates by 25 basis points, taking the benchmark rate to 4.75%. This was its second rate cut this year after starting the cutting cycle in August with a 25 basis point cut.
However, Bank of England governor Andrew Bailey was more cautious about the outlook for rate cuts in light of the government’s recent budget.
Andrew Bailey warned that inflation could be as much as 0.5% higher next year following the budget, which sees the Labour government borrowing heavily to spend.
Following the meeting, the market is pricing in just a 15% probability of a 25 basis point rate cut in December, down from 25% before the meeting and 70% at the start of the month.
Today, the U.K. economic calendar is relatively quiet. Bank of England chief economist Huw Pill is due to speak.
The euro has fallen this week following Trump’s victory in the US presidential elections, raising fears that trade tariffs could be applied in Europe.
Donald Trump pledged to apply tariffs of 10 to 20% on all imports into the US. Europe has on the largest trade deficit with the US and is one of its largest trading partners, meaning that it’s in the firing line for tariffs to be applied.
Trade tariffs could hurt the fragile economic growth in the region, potentially forcing the ECB to cut interest rates faster to support the economy.