- Pound (GBP) is rising for a seventh day
- BoE rate decision is next week
- Euro (EUR) falls after regional German inflation cooled
- Eurozone CPI is next week
The Pound Euro (GBP/EUR) exchange rate is rising for a seventh straight day. The pair rose 0.03% in the previous session, settling on Thursday at €1.1948. It traded in a range between €1.1916 and €1.1966. At 11:00 UTC GBP/EUR trades 0.09% higher at €1.1965.
The euro is falling lower after regional inflation from Germany cooled in January fuelling expectations that the European Central Bank will continue cutting interest rates.
Yesterday, the ECB reduced rates by 25 basis points to 2.75 percent as they raised concerns over the region’s growth outlook.
Eurozone GDP stagnated at the end of 2024 and retail sales from Germany were dismal. German retail sales fell 1.6% month on month in December, defying expectations of a 0.2% increase. They came after disappointing retail sales in November, and data shows that the German economy contracted in the final quarter of last year.
Looking ahead to next week, eurozone inflation data will be released weaker. Figures from the region could support the view that the ECB will continue cutting rates throughout 2025.
After the ECB rate decision this week, the pound is looking ahead to the Bank of England interest rate decision next Thursday. The central bank is widely expected to cut interest rates by 25 basis points after cutting rates twice last year in August and November.
The interest rate decision comes as UK inflation unexpectedly eased to 2.5% year on year in August, and service sector inflation cooled to 4.4% in December.
The outlook for the UK labour market is souring following Labour’s October budget, which increased the tax burden on employers. The labour market could weaken, and wage growth could soften, potentially bringing service sector inflation down faster.
The market will be closely watching the Bank of England’s outlook for rate cuts in 2025.