- Pound (GBP) rises after falling last week
- BoE is expected to leave rates unchanged at 4.5%
- Euro (EUR) falls after recent gains
- Germany votes on fiscal reforms tomorrow
The Pound Euro (GBP/EUR) exchange is rising after two weeks of losses. The pair fell 0.34% in the previous session, settling on Friday at €1.1884. It traded in a range between €1.1832 and €1.1945. At 11:30 UTC, GBP/EUR is trading 0.13% at €1.1899.
The pound is edging higher on Monday as investors turn their attention to this week’s Bank of England interest rate decision. At the right decision on Thursday, policymakers are expected to leave interest rates unchanged at 4.5% and point to gradual moves for rate cuts ahead. This is due to rising uncertainty following the fallout of Trump’s trade war and mixed news on the UK economy.
The next rate count is likely to be in May, followed by another reduction in August and then in November.
News flow has been limited on the state of the UK economy since the Bank of England’s last rate cut. Furthermore, Trump’s flip-flopping on trade tariffs has thrown financial markets into a tailspin, raising questions over the inflation outlook across the globe.
The euro is trading cautiously at the start of the week as investors await tomorrow’s key vote in Germany on fiscal reforms.
According to media reports, Germany’s likely next chancellor, Friedrich Merz, had won support from the Greens party to increase public borrowing to allow a rise in defense spending. This motion requires a change to the German constitution and, therefore, needs the budgets of lawmakers elected to the country’s parliament.
Meanwhile, the economic calendar in the eurozone is relatively quiet this week. Attention will be on German ZEW economic sentiment tomorrow and any comments from Trump regarding trade tariffs against the European Union after trade tensions escalated last week.
Trump imposed 25% trade tariffs on European steel and aluminum imports, and the EU retaliated with tariffs on €26 billion of US imports. Trump responded angrily, threatening 200% trade tariffs on alcohol imports.