- Pound (GBP) is falling for a fifth day
- UK GDP contracted -0.3% MoM
- Euro (EUR) rises for a fifth day
- The EUR rises on USD weakness amid trade tensions
The Pound-Euro (GBP/EUR) exchange rate is falling for a fifth straight day. The pair fell by 0.22% in the previous session, settling on Tuesday at €1.1788. It traded between €1.1778 and €1.1835. At 15:30, GBP/EUR trades -0.39% at €1.1742.
The pound is falling as the UK GDP contracted by more than expected in April, experiencing its worst monthly contraction since 2023.
Data from the Office for National Statistics showed that UK GDP declined 0.3% month on month in April, below the 0.1% contraction forecast by economists. Delving deeper into these figures, the dominant service sector fell 0.4%, while manufacturing contracted 0.9%.
The data prepares for a week of Q2 as consumers and firms navigate rising unemployment, high taxes, and the impact of Trump’s trade tariffs.
The data comes just days after UK labour market figures showed that unemployment rose to 4.6% and that the UK is shedding jobs at the fastest pace since COVID after the labour government lifted the tax burden on firms paying the national insurance.
The weak data has increased expectations that the BoE will cut interest rates twice this year.
The Bank of England will meet again next week; however, the broader expectation is that they will leave interest rates unchanged in the June meeting.
The euro is surging against the pound and the US dollar, as the common currency once again benefits from the weakness of the US dollar.
As President Trump rattles investors about reciprocal tariffs announced in the coming weeks as the 90-day deadline runs out, the US dollar is falling, and the euro has charged higher.
The euro is seen as a stable and liquid alternative to the US dollar despite the stagnant growth picture. The ECB is nearing the end of its rate-cutting cycle after cutting rates by 25 basis points last week
