- Pound (GBP) is rising and is set to gain across the week
- BoE’s Catherine Mann pushed back on rate cut expectations
- Euro (EUR) is falling as German retail sales rise
- German inflation data is up next
The Pound-Euro (GBP/EUR) exchange rate is inching higher after losses yesterday. The pair fell -0.26% yesterday, settling on Thursday at €1.1567. It traded between €1.1561 and €1.1610. At 07:30 UTC on Friday, GBP/EUR trades 0.03% at €1.1571. The pair is on track to rise 0.22% across the week, after falling 0.35% the week before.
The pound is on track to rise this week as investors push back expectations of a BoE rate cut. Hawkish comments from Bank of England Monetary Policy Committee member Catherine Mann, made earlier in the week, supported this view. Mann warned that she saw a strong case to keep interest rates on hold for a prolonged. Underscoring concerns at the Bank of England regarding persistent inflation.
While Catherine Mann is known to be one of the more hawkish members on the BoE Monetary Policy Committee, her comments support the market view that the central bank will not be cutting interest rates again this year.
The EUR is under Modest pressure after German retail sales fell by more than expected in July. Official data showed that retail sales dropped 1.5% month-on-month last month, after rising 1% in August. Economists had expected a 0.4% decline in sales.
The data underscores concerns over the health of the German consumer, just days after consumer sentiment data revealed a decline in the area’s rating mood. Data earlier this week showed that consumer sentiment in the US, the largest economy, continued to weaken in August as income and economic expectations declined significantly.
Looking ahead, attention will be on German inflation as measured by the consumer price index. Expectations are for the CPI to increase to 2.1% year-over-year in August, up from 2%. With inflation still hovering around the ECB’s 2% target, the central bank is not expected to cut rates again until later in the year.
