- Pound (GBP) falls for a third day
- concerns over UK fiscal and inflationary outlook remain
- Euro (EUR) is rising vs GBP but flat vs USD
- ECB is expected to cut rates this month
The Pound Euro (GBP/EUR) exchange rate is falling for a third straight day. The pair fell 0.29% in the previous session, settling on Thursday at €1.1944. It traded in a range between €1.1893 and €1.1989. At 11:00 UTC, GBP/EUR trades -0.12% at €1.1935. The pair is set to fall 0.92% this week.
The pound is falling for a third straight day, although some dip buying is stemming the losses, with some believing the recent selloff may have been overdone.
The pound and UK bonds (Gilts) have fallen sharply this week as investors fret over the inflationary and fiscal outlook.
While the UK Gilt sell-off is part of the global rout in bonds, the UK was leading the charge lower as investors lost confidence in the government’s ability to manage public finances.
A lack of data this week has also meant that the markets have little to distract themselves with other than the impact of the chancellor’s budget on the economy.
Tesco, the UK’s largest private sector employer, warned yesterday that the Labour government’s tax changes will add an extra £250 million to its employer wage bill. If this is passed onto the consumer, prices will rise, meaning more gloom for households.
Looking ahead, UK inflation and retail sales data will be a key focus.
The euro is headed higher against the pound but is flat against the USD. Data this week has highlighted ongoing weakness in the eurozone economy, particularly the German economy. Esterda Eurozone retail sales rose by just 0.1% month on month, below the 0.4% forecast.
Softer-than-expected data from the region and the eurozone’s largest economy have added to expectations that the ECB will cut rates again at the end of this month. Further rate cuts are expected across the year, which should likely limit the euro’s upside.
