- Pound (GBP) is rising, adding to gains last week
- UK manufacturing PMI contracted at 48.3 in January
- Euro (EUR) falls after Trump threatens trade tariffs
- Eurozone CPI rose to 2.4% YoY
The Pound Euro (GBP/EUR) exchange rate is rising, extending gains from last week. The pair rose 0.54% in the previous week, settling on Friday at €1.1954. It traded in a range between €1.1873 and €1.1973. At 11:00 UTC GBP/EUR trades 0.13% higher at €1.2014.
The euro is falling sharply after President Trump applied trade tariffs to Mexico, Canada, and China and warned that the European Union and the UK were next.
President Trump has previously highlighted the European Union’s trade surplus with the US as a reason for applying tariffs.
ECB policymaker Francois Villeroy de Galhau warned that trade tariffs will increase economic uncertainty for the region where growth is already stagnating.
The ECB cut interest rates by 25 basis points last week to support the weakening economy even as inflation remained above the 2% target.
Today’s inflation data confirmed that consumer prices rose 2.5% year over year in January, up from 2.4% in December. Meanwhile, core inflation, which disregards more volatile items such as food and fuel, remained unchanged at 2.7%, defying expectations of a fall to 2.6%.
The pound is pushing higher against the EUR but falling against the USD. Worries about trade tariffs on the UK could limit the upside as a good week for manufacturing PMI data.
Data showed that UK manufacturing PMI remained below the 50 mark that divides grade from contraction for a fourth straight month as new orders and employment fell and companies were hit with higher costs even before payroll taxes and minimum wage go up in April.
The manufacturing PMI was 48.3 in January from 47 in December, slightly up from the preliminary reading of 48.2.
The data comes ahead of the Bank of England’s interest rate decision on Thursday. The central bank is widely expected to cut rates to 4.5% from 4.75% and could point to further rate reductions this year.
