- Pound (GBP) is rising for a second day
- UK grocery inflation rose to 2.8% YoY in May
- Euro (EUR) falls as French inflation eases to 0.6% YoY
- Trump delays 50% tariffs on the EU
The Pound-Euro (GBP/EUR) exchange rate is rising for a second day. The pair rose by 0.08% in the previous session, settling on Monday at €1.1911. It traded between €1.1885 and €1.1925. At 09:30, GBP/EUR trades 0.13% at €1.1927.
The pound has risen to a seven-week high against the euro as traders returned from a long weekend break, and after supportive data last week.
Stronger-than-expected UK retail sales and hotter-than-expected UK inflation, which rose 3.5%, support the view that the Bank of England will keep interest rates on hold for the time being.
Meanwhile, data showed that food prices were up 2.8% in May in annual terms, rising from a 2.6% increase in April. This is a sign that inflation is rearing its head once again.
The market is pricing in just a 15% probability of the central bank cutting rates by 25 basis points in the June meeting, down from 50% just a few weeks ago.
Policy makers have suggested they want to see more progress in disinflation before cutting rates further.
The euro is under pressure despite the EU tariff deadline with the US being extended, and after softer-than-expected French inflation data highlighted divergence between the BoE and ECB expectations.
Over the weekend, Donald Trump delayed a 50% tariff on the EU until July 9 in hopes of a quick deal to resolve EU-US trade talks.
French inflation slowed to 0.6% in May, its lowest level since December 2020. This was due to a sharp decline in energy prices and a slowdown in service costs. Service inflation rose 2.1% down from 2.4% in April, and energy prices fell 8.1% compared with May 2024, steeper than April’s 7.8% decline.
The data supports the view that the ECB will cut interest rates again by 25 basis points in the June meeting.