- Pound (GBP) is rising after losses last week
- BoE Chief Economist adopted a slightly more hawkish tone
- Euro (EUR) fell on Friday after EZ investor confidence fell
- Eurozone composite PMI rose to a 17-month high
The Pound-Euro (GBP/EUR) exchange rate is rising after losses last week. The pair fell 0.22% in the previous week, settling on Friday at €1.1379. It traded between €1.1324 and €1.1416. At 14:00 UTC, GBP/EUR trades 0.03% at €1.1382.
The pound is rising against the euro and the US dollar amid an upbeat market mood, as U.S. government shutdown talks advance.
The pound is finding some support from more hawkish comments from Bank of England chief economist, Huw Pill, who warned that the market shouldn’t read too much into a shift in language in November’s monetary policy report.
The BoE statement no longer included the word ‘careful’ alongside ‘gradual’ when discussing the Bank rate. The statement says the Bank rate is likely to continue on a gradual downward path. I move that the market took as a more dovish stance, along with the tighter-than-expected 5-to-4 vote.
There is no UK economic data today, attention will turn to tomorrow’s unemployment data, which is expected to show the unemployment rate ticked higher to 4.9% up from 4.8%. Wage growth is also expected to cool from 4.7% to 4.6%.
The euro is falling against the pound but rising against the USD as investors digest a deterioration in investor confidence and await speeches from a slew of ECB policymakers.
Eurozone investor confidence slipped to -7.4 in November, down from -5.4 in October as the economy struggles to emerge from its slump. This was below expectations of -3.9.
Both the current situation and expectations declined at a similar rate, suggesting a persistent gloomy assessment and that there may not be an autumn upturn in the region.
That said, recent PMI data was more encouraging. The composite PMI, a good gauge of business activity, rose to 52.2 in October, a 17-month high.
Meanwhile, ECB policymakers will be hitting the airwaves this week. The ECB is not expected to cut interest rates again this rate-cutting cycle, given that inflation is around the target level. The focus would be on growth, which appears to be moving in the right direction, albeit very slowly.