- Pound (GBP) falls after gains yesterday
- The outlook for rates is more dovish
- Euro (EUR) rises on Russian Ukraine peace hopes
- Trump had a productive call with Russia
The Pound Euro (GBP/EUR) exchange is falling reversing yesterday’s gain. The pair rose 0.1% in the previous session, settling on Tuesday at €1.2007 and traded in a range between €1.1970 and €1.2018. At 15:45 GBP/EUR is trading -0.30% lower at €1.1977.
The euro is rising, and European equities hit new record highs after Trump said the US and Russia will start talks on the Ukraine war immediately to end it.
The phone call, which Trump called productive, points to a significant turnaround in the Russia relationship amid signs that Washington will also rein in its support for Ukraine after almost three years of war.
Trump said that he and Putin agreed to work closely to ensure progress. Trump also poured cold water on Ukraine’s hopes of joining NATO and restoring its borders from before Russia annexed Crimea in 2014.
The prospect of the end or at least a peace process between Ukraine and Russian is lifting the euro.
Today, the eurozone released little economic data. Tomorrow, German inflation and eurozone industrial production will be released.
The pound is falling against the euro and is unchanged against the US dollar amid ongoing uncertainty surrounding the BoE outlook for rate cuts. The market has moved to price in more easing from the BoE this year after the central bank reduced interest rates by 25 basis points last week. Bank of England policymaker Catherine Mann, who had been the most hawkish member of the management Policy Committee, surprised the market by voting for a 50 basis point rate cuts. She expects soft consumer demand as the risk of deterioration in the labour market builds.
The UK economic calendar was quiet today. Tomorrow sees the release of UK Q4 GDP which is expected to show a -0.1% contraction.
