- Pound (GBP) rises for a second day
- BoE leaves rates unchanged at 4.5%
- Euro (EUR) falls after ECB Lagarde speech
- Lagarde laid out the cost of the trade war on the economy
The Pound Euro (GBP/EUR) exchange is rising for a second straight day. The pair rose 0.39% in the previous session, settling on Wednesday at €1.1922. It traded between €1.1873 and €1.1934. At 16:30 UTC, GBP/EUR is trading 0.26% at €1.1953.
The pound is rising on Thursday after the Bank of England interest rate decision. The central bank left rates unchanged at 4.5%, in line with economists’ expectations after cutting rates by 25 basis points in the previous meeting.
However, the vote split was slightly more hawkish than expected, with eight policymakers voting to leave rates unchanged while one policymaker voted to cut rates. Expectations had been for a 7 -2 vote split. Catherine Mann, who had voted for a50 basis point cut in last month’s meeting, this time, voted to keep rates on hold, surprising the markets.
The Bank of England’s statement emphasised increasing global economic uncertainties due to the potential fallout from Trump’s trade tariffs. There is also domestic uncertainty, with inflation expected to push higher and growth falling.
The euro is falling against the pound and the USD after ECB president Christine Lagarde warned about the cost of the trade war with the US on the eurozone’s economy.
The US has imposed tariffs on steel and aluminium products from the European Union, along with other countries worldwide. Meanwhile, EU retaliatory measures will take effect in April.
Lagarde warned that the 25% tariff imposed by the US on imports from Europe would lower eurozone growth by around 0.3% in the first year, and retaliatory measures could mean this increases to 0.5%
Further trade integration with others could offset these losses, and Lagarde also welcomed Germany’s huge spending plans to boost its military and infrastructure. She downplayed any concerns over treasury yields.