- Pound (GBP) falls after gains last week
- Attention turns back to the BoE
- Euro (EUR) is rising ON Russia-Ukraine peace hopes
- Eurozone inflation data is due tomorrow
The Pound-Euro (GBP/EUR) exchange rate is falling after gains last week. The pair rose 0.34% in the previous week, settling on Friday at €1.1416. It traded between €1.1336 and €1.1436. At 18:00 UTC, GBP/EUR trades -0.33% at €1.1379. The pound is falling against the euro as the Rachel rally runs out of steam.
The pound had booked strong gains following the chancellor Rachel Reeves’ long-awaited budget last week, which eased some concerns over the UK’s long-term finances.
The chancellor managed to increase her headroom to £22 billion, although there are questions over whether she misled the nation about the state of the economy heading into the budget.
Even so, some policy and political uncertainty has eased now that the budget is out of the way, and the pound rallied at the end of last week in relief.
However, attention is now turning back to the Bank of England, and the outlook for sterling could still be weak over the coming months, especially against the euro.
The market is pricing in a 90% probability that the Bank of England will cut interest rates again at the December meeting, following a tight 5-4 vote in the previous meeting.
Bank of England policymaker Megan Greene said she would need to see more signs of weakening in the labour market and in consumption, and an economy deteriorating, before voting for an interest rate cut.
The EUR was pushing higher, supported by hopes of peace between Russia and Ukraine. The two sides are reportedly moving closer to a peace deal. The EUR is cheering the prospect of peace on its borders.
Attention is now turning to Eurozone inflation data due tomorrow, which is expected to remain close to the ECB’s target 2% level.
National inflation levels were a mixed bag last week, with Germany and Spain posting hotter-than-expected inflation, while France and Italy saw cooler-than-expected inflation.