- Pound (GBP) falls for a second day
- The BoE hawk-turned-dove Catherine Mann plays down inflation worries
- Euro (EUR) rises despite trade tariff worries
- The EC will apply retaliatory levies
The Pound Euro (GBP/EUR) exchange rate is falling for a second day. The pair fell 0.17% in the previous session, settling on Monday at €1.1995. The pair traded in a range between €1.1994 and €1.2060. At 12:30 UTC GBP/EUR is falling -0.11% at €1.1982.
The pound is falling after dovish comments from Bank of England policymaker Catherine Mann. In the latest Bank of England monetary policy meeting, Catherine Mann, who was previously one of the most hawkish members of the Monetary Policy Committee, turned significantly dovish, voting to cut rates by 50 basis points last week.
In a speech today, Catherine Mann explained that she sees inflation cooling to a target level by next year owing to subdued demand.
The comments come after the Bank of England reduced rates by 25 basis points but lifted the inflation outlook for this year to a peak of 3.8% in Q3. However, man believes it will be back to 2% in 2026.
Bank of England governor Andrew Brailey is also due to speak today. Markets will be watching closely for clues over the outlook for monetary policy.
The EUR is rising against the pound but falling against the dollar amid ongoing concerns regarding trade tariffs and after comments from ECB president Christine Lagarde.
Lagarde said she sees the disinflation process continuing suggesting that consumer prices will continue easing towards the central bank’s 2% target. However, she also noted that global friction makes the inflation outlook uncertain.
European Commission president Ursula von der Leyen said that retaliatory levies would be applied after President Trump announced 25% tariffs on steel and aluminum imports.
The European Union accounts for around 15% of aluminium imports to the US. European steelmaking stocks are under pressure today.
Looking ahead, the economic calendar is quiet. Later in the week, eurozone Q4 GDP figures will provide a clearer picture of the health of the eurozone economy.
