- Pound (GBP) falls for a second day
- After the Budget, attention turns back to the BoE
- Euro (EUR) is rising after hotter German inflation data
- ECB minutes showed the rate-cutting cycle could be over
The Pound-Euro (GBP/EUR) exchange rate is falling for a second day. The pair fell -0.02% in the previous session, settling on Thursday at €1.1418. It traded between €1.1401 and €1.1436. At 18:00 UTC, GBP/EUR trades -0.08% at €1.1409. The pair is set to rise 0.28% across the week, its second straight week of gains.
The pound fell against the euro on Friday but booked gains across the week and achieved its strongest weekly performance against the US dollar in three months amid signs of relief among UK investors following the Chancellor’s long-awaited budget earlier this week.
The Chancellor announced plans to raise £26 billion in tax, to take the tax burden to 38% of GDP.
With the budget now in the rearview mirror, attention will turn back to data on the Bank of England, which is widely expected to cut interest rates again in the December meeting, after a narrow 5 to 4 vote in November.
The euro rose on Friday after data showed German inflation rose further from the ECB’s target.
Germany, the eurozone’s largest economy, saw inflation unexpectedly rise to the highest level in nine months in November, offering a reminder to ECB policy makers that risks to price stability remain.
The inflation reading came in at 2.6% year on year in November, up from 2.3% last month. This was above forecasts of 2.4%. However, it is expected to be a spike rather than the start of a new trend.
Price pressures were weaker than expected in France, Italy, and stronger in Spain, with the inflation reading from the bloc due on Tuesday.
The minutes to the October ECB meeting showed that policymakers are increasingly convinced that the rate-cutting cycle in the eurozone has finished. However, sticky inflation remains a concern, as service and food costs are rising, and consumers’ price expectations for the next 12 months are at 2.8%, although they are on target for three and five years ahead.