- Pound (GBP) is rising after two days of gains
- BoE is not expected to cut rates next week
- Euro (EUR) is lower but holds some gains versus the USD
- ECB warns that an elevated EUR could fuel further rate cuts
The Pound-Euro (GBP/EUR) exchange rate is rising after two days of losses. The pair fell -0.12% in the previous session, settling on Tuesday at €1.1501. It traded between €1.1470 and €1.1536. At 15:30 UTC on Wednesday, GBP/EUR trades 0.23% higher at €1.1527.
The pound is rising against the euro but falling against the U.S. dollar, though it remains at multi-year highs versus the greenback.
Given the light UK economic calendar, moves in both the pound and the euro are driven more by volatility in the US dollar.
The pound is finding some support from the view that the Bank of England can afford to proceed cautiously before cutting interest rates further.
The Bank of England is expected to leave interest rates on hold on February 5th. Inflation in the UK remains among the highest in the group of seven industrialised peers and the 9-member MPC committee, according to recent meetings.
The euro is falling against the pound and against the dollar after reaching a multi-year high of 1.20 versus the greenback. The EUR has fallen about 1% from there but remains above 1.19.
This performance has shaped recent comments from ECB officials, including governing council member Martin Kocher, who warned that further currency appreciation could become problematic if it starts to weigh on inflation projections. These comments pulled the euro lower, and money markets increased the chances of an interest rate cut as early as July to 25%, up from 15% previously.
Other ECB officials have echoed a similarly cautious stance, noting that a stronger EUR could impact inflation and increase the chances of another rate cut.
Looking ahead, attention turns to Eurozone GDP data due on Friday, which is expected to show the economy grew 0.3% quarter-on-quarter.