The pound – euro (GBP/EUR) exchange rate is falling, extending last week’s losses as it hits a 5-month low.
The pound is falling on expectations the BoE will ciut interest rates more aggressively. After a series of softer data last week, the market is pricing in 62 basis points of rate cuts this year. This is up from just 40 prior to UK inflation data last week.
The euro is rising after ECB’s Holzmann wanted that another ECB rate cut isn’t a foregone conclusion.
His comments contrast with the ECB’s December meeting minutes which suggested that inflation could cool to 2% at a faster pace than initially expected.