- Pound (GBP) is rising for a second straight day
- Goldman Sach expect large tax hikes from the Budget
- Euro (EUR) falls further as a new PM is appointed
- ECB is expected to leave rates unchanged
The Pound-Euro (GBP/EUR) exchange rate is flat after two days of gains. The pair rose 0.09% in the previous session, settling on Wednesday at €1.1565. It traded between €1.1545 and €1.1595. At 16:00 UTC, GBP/EUR trades -0.00% at €1.1565.
The EUR is unchanged after the ECB left interest rates unchanged at 2% for the second straight meeting as policy makers assess the impact of the trade deal between the US and the EU.
The decision was in line with expectations and came following ECB president Christine Lagarde’s comments in July, when she said the central bank had switched to a wait-and-see mode after cutting rates 8 times over the past year.
With inflation hovering around the ECB’s 2% target level, policymakers are weighing up how the 15% tariffs imposed on EU imports into the US will impact the economy. Policy makers have been divided over the impact, with some seeing US tariffs as net inflationary, while others are concerned over the hit to growth.
The eurozone economy grew just 0.1% in the second quarter, and inflation rose to 0.2% year on year in August. The ECB upwardly revised its GDP forecast and now expects 1.2% growth in the eurozone this year.
The pound is quiet despite signs that the UK housing market is coming under pressure. Data from the Royal Institute of Chartered Surveyors showed that house prices fell by the most in a year and a half, against the backdrop of a weak economy, higher inflation, and uncertainty surrounding the interest rate outlook.
The data showed that the house price balance, which measures the difference between the percentage of observers seeing rises and falls in house prices, fell to -19 last month, down from -13 in July, marking its weakest level since January 2024.
Concerns over the wide economic and fiscal outlook and around the future path of interest rates are weighing on sentiment.
Looking ahead, attention will turn to UK GDP data, which is due tomorrow and is expected to show that the UK economy stalled at 0% growth in July after growing 0.4% in June.