- Pound (GBP) is falling after 5 weeks of gains
- UK government agreed to a reset of trade relations with the EU
- Euro (EUR) rises in a risk-off environment
- EU inflation eases to 2.2%
The Pound-Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.52% in the previous week, settling on Friday at €1.1891. It traded between €1.1816 and €1.1917. At 10:30, GBP/EUR trades -0.18% at €1.1870.
The pound is falling against the euro but rising against the US dollar as Britain agrees its most significant reset of defence and trade relations with the European Union since Brexit.
Almost nine years after voting to leave the European Union, the UK has agreed to participate in joint procurement projects with the bloc. The two sides have also agreed to make it easier for UK food and visitors to reach the EU amid a signed contentious new fishing deal.
UK Prime Minister Keir Starmer believes the reset will reduce red tape for food and agricultural producers, making food cheaper while improving energy security. The government says this will boost the economy by £9 billion over the coming 15 years.
The UK has also struck deals with India and the US this month.
The UK economic calendar is quiet today; however, UK inflation, retail sales, and PMI figures are due to be released this week.
The euro is gaining ground in part due to a risk-off mood in the market after Moody’s downgraded its US credit rating.
On the data front, eurozone data showed that consumer prices rose 2.2% in April. Core, the CPI, which excludes more volatile items such as food and fuel, rose to 2.7%, up from 2.4% previously.
Services remained a primary driver of inflation, followed by food, alcohol, and tobacco.
The data comes after the ECB cut rates by 25 basis points in the April meeting and as the market is pricing in 91% chance for another 25 basis point cut in the June meeting.
The market is pricing in a total of 51 basis points of cuts by the end of this year.
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