- Pound (GBP) is falling for a second day
- BoE’s Taylor called for lower interest rates
- Euro (EUR) rises after hotter than expected German inflation
- ECB is expected to cut rates next week
The Pound-Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell by 0.5% in the previous session, settling on Thursday at €1.1867. It traded between €1.1858 and €1.1973. At 09:30, GBP/EUR trades -0.07% at €1.1858.
The pound was under pressure on Friday after Bank of England policymaker Alan Taylor downplayed concerns over a recent increase in inflation and renewed calls for lower interest rates.
Last week, UK consumer price inflation rose to 3.5% year over year in April, up from 2.6% in March. This was ahead of the 3.3% forecast. However, Taylor noted that the strong inflation was due to one-time tax and price changes rather than demand and supply pressures.
The BoE cut its inflation forecasts last month, saying it will peak at 3.5% in Q3 of 2025 rather than 3.75% as previously expected.
Taylor voted for a 50-basis-point rate cut in the May meeting, when policymakers agreed to cut rates by 25 basis points.
The euro is rising as German inflation cooled by less than expected ahead of next week’s ECB rate decision.
German inflation rose by 2.1% year on year in May, more than the 2% start economists predicted, but lower than the 2.2% increase seen in April.
The data followed reports from Italy and Spain, where inflation is just below the 2% level, supporting the case for lower interest rates. Data from France earlier in the week showed that the consumer price rose just nought .6% annually.
The ECB is expected to cut interest rates again on June 5th, when policymakers will also update with fresh quarterly projections. Policymakers are expected to weigh the implications of US trade tensions and their impact on the eurozone economy.