- Pound (GBP) rises after losses last week
- UK unemployment, inflation, and retail sales data is due this week
- Euro (EUR) falls on trade tariff worries
- ECB’s Panetta warned of inflation undershooting
The Pound Euro (GBP/EUR) exchange is rising after modest losses last week. The pair fell 0.2% in the previous week, settling on Friday at €1.1991 and traded in a range between €1.1951 and €1.2060. At 17:45 GBP/EUR is trading 0.48% higher at €1.2050
The pound pushed higher at the start of the week, recouping losses from the previous week, as investors await key data points that could help provide more clues about the outlook for the Bank of England rate decisions. This week, UK employment data, inflation figures, and UK retail sales will be released tomorrow and Wednesday.
Investors will pay close attention to tomorrow’s labor market data to determine whether business owners are still reeling from Chancellor Rachel Reeves’s announcement of raising employers’ tax burden in the autumn budget. Rachel Reeves lifted employers’ Social Security contributions from 1.2% to 15% as of this April. Since the announcement, industry data has shown that hiring has slowed sharply as business owners fret about the rising costs.
The data comes after Bank of England governor Andrew Bailey said that he expects some softness in the labour market, although he is still confident that disinflation will continue.
The euro found the start of the week amid ongoing concerns over the likely impact of U.S. President Donald Trump’s tariffs on the eurozone. Expectations are that the significant impact of levies on autos will be on Germany. According to the OECD, Germany exported $24.3 billion worth of vehicles to the US in 2023.
Meanwhile, ECB policymaker and Bank of Italy governor Fabio Panetta said he was worried about inflation falling below the central bank’s 2% target over the medium term. His dovish comments weighed on the euro. He also said that he considered US tariffs and any retaliation from Europe could have a limited impact on Eurozone inflation, if not be slightly negative.
