- Pound (GBP) is rising across the week
- UK GDP data is due next week
- Euro (EUR) falls after yesterday’s rate cut
- The ECB Pare only expected to cut once more this year
The Pound-Euro (GBP/EUR) exchange rate is rising after two days of losses. The pair fell by 0.13% in the previous session, settling on Tuesday at €1.1855. It traded between €1.1835 and €1.1892. At 17:30, GBP/EUR trades 0.14% at €1.1872. The pair is set to rise 0.09% across the week.
The pound pushed higher on Friday, supported by the UK economy, which is showing resilience in the face of global turbulence. Investors are also monitoring the government spending plans.
Whilst the UK has been spared from US tariffs on steel and aluminium and reached a deal with Washington last month, there are still some concerns over the outlook for growth going forward. UK GDP data next week, as expected, shows that the UK economy grew just 0.1% month on month in April after growing a stronger-than-expected 0.7% across the first quarter of the year.
The gilt auction this week showed healthy demand for UK debt. However, Finance Minister Rachel Reeves’s spending plans, to be announced on Wednesday, could be the next test for gilt demand.
The euro is under pressure amid a quiet day for eurozone economic data. The market continues to digest yesterday’s ECB interest rate cut, which saw the central bank reduce rates by 25 basis points to 2 2%.
Inflation in the region has cooled below the 2% target. However, traders are using this range in their bets on future rate cuts following hawkish comments from ECB president Christine Lagarde, who said that the central bank’s easing cycle had nearly concluded.
The market is now only expecting one more rate cut in the second half of this year. However, the outlook remains murky given the uncertainty surrounding Trump’s trade tariffs and whether the EU and the US will agree on a trade deal or whether the EU will be slapped with a 50% trade tariff from July 9.
