- Pound (GBP) is unchanged after falling last week
- The BoE is expected to cut rates in a tight vote
- Euro (EUR) is flat despite encouraging industrial production figures
- Industrial production rose 0.8% MoM
The Pound-Euro (GBP/EUR) exchange rate is unchanged after losses last week. The pair fell -0.52% in the previous week, settling on Friday at €1.1390. It traded between €1.1372 and €1.1471. At 12:00 UTC, GBP/EUR trades -0.02% at €1.1388.
The pound is holding steady at the start of the new week as investors look cautiously ahead to the Bank of England interest rate decision on Thursday. At the final MPC meeting of the year, BOE is expected to cut rates by 25 basis points, bringing the benchmark rate to 3.75% from 4%. However, the vote is still expected to be very tight with a 5 to 4 vote in favour of a cut as Governor Andrew Bailey is expected to change his view and tip the balance in favour of a reduction.
Recent comments from policymakers suggest they remain divided on whether job losses or inflationary pressures pose the greatest risk to the economy. Bank of England governor Andrew Bailey hinted last month that the possibility of voting in favour of a cut if there was evidence of falling inflation. UK headline inflation was 3.6% year on year in October, suggesting it peaked at 3.8% in September. However, this is still some way above the Bank of England’s 2% target rate.
Data on Wednesday, just a day before the vote, is expected to show that inflation edged down to 3.5% in November.
The euro is unchanged versus its major peers despite encouraging industrial production figures. Data showed that eurozone industrial production unexpectedly rose 0.8% month on month in October, well ahead of the 0.1% estimate and up from 0.2% in September. This marked the highest level since May 2025.
The eurozone’s manufacturing sector has struggled since 2022, amid high energy prices following the Russian invasion of Ukraine and intensifying Chinese competition. However, declining oil and gas prices have brought some relief, whilst reduced inventories are giving way to increased production.
Data reinforces the view that the eurozone’s industrial recovery is gaining momentum and will reinforce the ECB’s conviction that no further rate cuts are needed.
