- Pound (GBP) falls amid a quiet day on the economic calendar
- BoE is expected to leave rates unchanged at 4.5%
- Euro (EUR) rises ahead of the key Gemam vote
- German vote on fiscal reform is expected to pass
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 euro is rising ahead of a key vote in Germany. The upper and lower houses are expected to approve Chancellor Friedrich Merz’s fiscal reforms, which will exempt defence spending from debt limits and establish a €500 billion infrastructure investment plan.
Optimism surrounding increased spending has helped the German DAX rally to record highs. The EUR is also boosted by expectations that higher spending could lift inflation.
This, combined with potential inflationary impacts from the US-EU trade war, resulted in the market reining in its ECB rate cut expectations this year to just two more cuts.
On the data front, German ZEW economic sentiment rose to 51.6 in March, beating the 41.8 expected by a wide margin, highlighting the improving morale in the region. The score, which ranges between -100 to +100, is based on a survey of around 350 German-based financial analysts at banks, insurers, and large industrial companies.
The pound is heading lower amid a quiet day on the economic calendar and as attention remains on the Bank of England rate decision later this week. The central bank is expected to leave rates unchanged and is likely to stick to only gradual moves ahead as it grapples with the fallout from President Trump’s trade war and mixed UK economic data. UK inflation is rising while growth contracts.
Chancellor Rachel Reeves will announce the spring statement next week and faces difficult decisions as she seeks to balance day-to-day public spending with tax revenues by the decade’s end. Plans for welfare cuts are being met by position among her colleagues.