- Pound (GBP) is rising for a second day
- BoE cut rates by 25 bps, but the pace may now slow
- Euro (EUR) is falling after German trade surplus narrows
- Russia-Ukraine developments eyed
The Pound-Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose 0563% in the previous session, settling on Thursday at €1.1520. It traded between €1.1435 and €1.1545. At 13:00, GBP/EUR trades +0.05% at €1.1531. The pair is on track to gain 0.6% across the week.
The fund is rising after comments from Bank of England chief economist Huw Pill, who warned on Friday that inflationary pressures could continue to weaken, but there was also a risk that future rate cuts could be delayed, due to changes in wage setting behaviour.
His comments came after the Bank of England cut interest rates by 25 basis points to 4% on Thursday; however, Pill, along with three other monetary Policy Committee members, voted to keep rates on hold due to inflationary pressures. This resulted in an unexpectedly tight vote of five to four to cut rates.
As a result, the Bank of England could slow its run of rate cuts, and now investors are not fully pricing in the next 25 basis point reduction until February next year.
The euro is under pressure against the pound and the US dollar amid a quiet economic calendar.
The euro slipped as investors digested the most recent trade data from Germany. The eurozone’s largest economy posted a trade surplus of €14.9 billion in June, down from €18.4 billion recorded in May.
Delving deeper into the figures, exports increase 0.8% compared to the previous month, rising to €130.5 billion.
Imports grew by 4.2% compared to the previous month to 115.6 billion. This marked the smallest trade surplus in 8 months and is weighing on the euro.
Separately, investors are also eyeing developments surrounding Russia and Ukraine as President Trump and Russian President Putin are reportedly set to meet in the coming days to discuss ending the war in Ukraine.