- Pound (GBP) is steady after losses yesterday
- BoE Bailey warned of a slower pace to rate cuts
- Euro (EUR) is unchanged after gains yesterday
- Eurozone inflation rose to 2% in October
The Pound Euro (GBP/EUR) exchange rate is holding steady after yesterday’s losses. The pair fell 0.09% in the previous session, settling on Friday at €1.1957 and trading in a range between €1.1939 and €1.1989. At 12:00 UTC, GBP/EUR trades -0.03% at €1.1957.
The pound is holding steady as the market looks to Bank of England governor Andrew Bailey’s appearance before the UK Treasury Select Committee where he will be questioned about the central bank’s monetary policy.
The Bank of England cut interest rates by 25 basis points in the October meeting to 4.75%. However, Bailey warned of a gradual pace for rate cuts to assess their impact on the economy, particularly in light of the labour government’s Budget. The central bank warned that the budget could have an inflationary impact on the economy.
Along a similar vein, Britain’s largest retailers have written to Finance Minister Rachel Reeves to warn her that the budget could raise prices and cause job losses over the coming years.
The letter was coordinated by the British Retail Consortium trade body and had signatures from retail bosses, including those from Marks and Spencer, Next Asda, Amazon UK, and Boots.
Looking ahead, UK inflation data will be released tomorrow and are expected to show that inflation moved back above the central bank’s 2% target to 2.2% annually in October, up from 1.7% in September. Hotter inflation could lift the number higher.
Meanwhile, the euro has also been holding steady after inflation data confirmed that consumer prices increased to 2% year on year in October, up from 1.7% in September. The data is in line with the preliminary reading.
The European Central Bank is still widely expected to cut interest rates in December. However, with inflation at the central bank’s 2% target level, a 25-basis-point cut is more likely than a 50-basis-point cut.
Attention will start turning to eurozone business activity data, which will be due to be released on Friday.