- Pound (GBP) is falling for a second day
- BRC showed shop prices rose 1.5% in January
- Euro (EUR) is higher after the EU and India agree on a free trade deal
- The deal eliminates €4 billion of tariffs on EU exports
The Pound-Euro (GBP/EUR) exchange rate is falling for a second day. The pair fell -0.18% in the previous session, settling on Monday at €1.1515. It traded between €1.1496 and €1.1546. At 15:30 UTC on Tuesday, GBP/EUR trades -0.12% lower at €1.1502.
The pound is falling on Tuesday but is gaining against the US dollar, approaching the 1.38 level, a six-month high.
Losses could be limited in sterling against the euro after data today showed that UK shop prices rose at the fastest pace in nearly two years.
According to the British Retail Consortium’s shop price index jumped by 1.5% in January, up from 0.7% in December. This showed that British retailers’ prices rose at the fastest pace since February 2024, led by a pickup in food, health and beauty product prices.
The data suggests that inflation may not have peaked and comes as recent data reinforce the view that the Bank of England can afford to remain patient before delivering further interest rate cuts.
The Bank of England is expected to leave rates unchanged in its meeting on February 5th, with only 55% of economists polled by Reuters expecting a rate cut by the end of March.
The euro is gaining against the pound and the US dollar after the EU and India sealed a free trade deal, which the two sides have been negotiating for 20 years.
Efforts to reach a deal accelerated in the past six months amid Trump’s trade tariff threats. Trump has applied 50% tariffs on some Indian imports.
The deal will eliminate up to €4 billion of tariffs on EU exports and could double shipments from the bloc to India.
This is the largest ever trade deal concluded by either side and will see tariffs reduced on 96.6% of EU exports to India, including cars and our column machinery. Meanwhile, more sensitive agricultural sectors for both sides, such as dairy, sugar, and some meats, were not included.