- Pound (GBP) steadies after losses last week
- Large firms plan to cut hiring
- Euro (EUR) is falling across the board
- ECB’s Lane warned of keeping rates too high for too long
The Pound Euro (GBP/EUR) exchange rate is edging higher after losses last week. The pair fell 1.15% in the previous week settling on Friday at €1.1910. It traded in a range between €1.1893 and €1.2076. At 18:00 UTC, GBP/EUR trades +0.09% at €1.1920.
The pound is studying the steep losses last week, which were attributed to several factors, including worries about the UK fiscal position, stagnant growth, and sticky inflation. UK gilt yields galloped higher on worries over UK fiscal sustainability, putting pressure on finance minister Rachel Reeves.
While the pound gained against the euro, sterling slumped sharply against the US dollar, falling to fresh 13-month lows.
The outlook for the UK economy remains gloomy as large companies plan to cut hiring faster since the pandemic and scale back investments due to big tax rises announced in the government’s autumn budget in October. Deloitte’s quarterly survey of chief financial officers at 63 of the UK’s largest companies echoed concerns of smaller and medium-sized businesses also impacted by the £25 billion increase in employers’ Social Security charges.
The rate was falling against the pound and the USD on Monday, following comments from ECB chief economist Philip Lane. Lane warned that inflation in the region could fall below the ECB’s 2% target if policymakers do not continue to cut interest rates. He warned that too little rather than too much inflation was now a risk that rate-setters needed to consider. He added that borrowing costs should not remain too high for too long.
His comments come ahead of the ECB interest rate decision at the end of the month. The central bank is widely expected to cut interest rates by 25 basis points.
The ECB is widely expected to cut rates by around 1% this year, more than its major pairs, which is keeping the euro under pressure.