- Pound (GBP) falls after gains yesterday
- BoE’s Bailey warned of risks to UK growth
- Euro (EUR) gains after IFO business climate
- German composite PMI fell into contraction
The Pound-Euro (GBP/EUR) exchange rate is falling on Thursday, snapping a two-day winning run. The pair rose 0.34% in the previous session, settling on Wednesday at €1.1710. It traded between €1.1648 and €1.1726. At 17:00 UTC, GBP/EUR is trading -0.24% lower at €1.1683.
The pound is under pressure as the markets continue to assess Trump’s trade tariff uncertainty and its impact on the global and UK economies.
Yesterday, the Bank of England governor, Andrew Bailey, warned that the central bank is taking the risk to economic growth from the upheaval in global trade very seriously. His comments come two weeks ahead of the central bank’s next rate decision on May 8th, when it will also release its latest economic forecasts.
Andrew Bailey was speaking at the International Monetary Fund’s spring meeting, which has been dominated by Trump’s trade tariffs. The IMF warned of a major negative shock from Trump’s trade tariffs and sees the UK economy among the hardest hit. The Washington-based organisation lowered UK growth forecasts to 1.1% this year, down from 1.6% previously forecast in January.
The EUR is rising against the pound after stronger-than-expected German business climate data. The figures showed that business morale unexpectedly improved in April, although expectations were slightly gloomier as uncertainty among companies increased.
The IFO Institute saw the business climate index rise to 86.9 in April, up from 86.7 in March, beating forecasts of 85.2.
However, the IFO’s expectations index dropped to 87.4 from 87.7.
The data comes after yesterday’s German PMI data, which showed that Germany’s private sector slipped back into contraction in April, triggered by the service sector and trade-related uncertainties, although the manufacturing sector showed some resilience.
The German composite PMI, which is considered a good gauge for business activity, came in at 49.7, down from 51.3 previously. The level 50 separates expansion from contraction.
