The pound – euro (GBP/EUR) exchange rate is rising after two days of losses.
The pound is strengthening against the euro but weakening versus the U.S. dollar, although it remains near multi-year highs against the greenback. With little UK economic data, sterling and euro moves are largely driven by recent U.S. dollar volatility.
Sterling is supported by expectations that the Bank of England will cut rates cautiously and keep rates on hold on February 5, amid still-elevated inflation.
The euro is falling after ECB officials warned that further appreciation against the USD could weigh on inflation, lifting expectations of another rate cut in July to 25% from 15%.
EUR/USD rose above 1.20 on Tuesaday.
Attention now turns to Eurozone GDP data on Friday.