- Pound (GBP) is falling after last week’s gains
- BoE’s Lombardelli supports slow rate cuts
- Euro (EUR) is rising after losses last week
- German IFO business morale fell by more than forecast
The Pound Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.44% in the previous week, settling on Friday at €1.1987 and trading in a range between €1.1952 and €1.2062. At 12:00 UTC, GBP/EUR trades -0.28% at €1.1988.
The pound is giving back some of last week’s gains despite hawkish comments from Bank of England deputy governor Clare Lombardelli.
The pound rose last week after the hotter than expected UK inflation and despite UK business activity falling into contraction, marking the first contraction since 2023. The composite PMI fell to 49.9 in November, down from 51.8, as businesses fretted over the government’s plans to increase taxes.
Today, Claire Lombardi said she was more worried about the risk of higher inflation and supports the central bank’s gradual reduction in interest rates.
In her first speech since joining the Bank of England in July, Claire Lombardelli acknowledged the downbeat business surveys, which suggest that inflation could cool. However, strong wage growth continues to pose an upside threat to consumer prices. She highlighted that she’s more concerned about the possible increase in inflation and would want to see more data before getting concerned about the outlook for the economy.
The euro is pushing higher, recapturing some of last week’s steep losses despite German business sentiment weakening further in November. Current conditions and outlook readings easing compared to the previous month.
Ifo German business climate slips to 85.7, down from 86.5 in November and below the 86 levels forecast by economists. The Ifo current assessment was also weaker than expected, falling to 84.3, down from 85.7 in October.
The data reaffirms the struggles in Europe’s largest economy as clouds gather on the horizon. The deterioration in business sentiment comes after PMI data showed that business activity contracted in November. The composite PMI fell to 48.1 from 50, paving the way for the ECB to cut rates again in December.