- Pound (GBP) rises but is down 1.88% YTD
- UKK manufacturing optimism drops to a 2-year low
- Euro (EUR) falls as dovish ECB calls grow
- Eurozone consumer confidence improves slightly in January
The Pound Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell -0.12% in the previous session, settling on Wednesday at €1.1831. It traded in a range between €1.1813 and €1.1863. At 16:30 UTC GBP/EUR trades 0.17% lower at €1.1857.
The euro is under pressure, weighed down by dovish expectations surrounding the European Central Bank.
ECB president Christine Lagarde and other policymakers, including Klass Knot and Yannis Stournaras, have all supported further rate reductions.
ECB president Christine Lagarde said yesterday that the central bank is not overly concerned about the risk of inflation abroad and will continue to cut interest rates gradually.
These dovish expectations overshadowed a slight improvement in eurozone consumer confidence.
Consumer sentiment improved in the euro area for the first time in three months rising to -14.2 in January up from -14.5 in December. However, it remained in negative territory suggesting that pessimism remains.
Looking ahead, attention will turn to tomorrow’s PMI data, which is expected to show that business activity contracted again in January.
Meanwhile, the pound is recovering, but is still down by almost 2% across January so far.
The pound has been pulled lower by concerns over the fiscal outlook and rising expectations that the Bank of England could cut interest rates several times this year amid a deteriorating economic outlook.
Data from the Confederation of British Industry showed that the sharp downturn in factories only eased slightly in January, and optimism among manufacturers slumped to its lowest level in over two years.
The data comes ahead of PMI figures tomorrow. The UK’s manufacturing PMI is expected to remain in contraction territory at 47.1, down from 47. Meanwhile, the services PMI is expected to fall to 50.6, down from 51.1.
