- Pound (GBP) rose, adding to last week’s gains
- BoE is expected to leave rates unchanged
- Euro (EUR) fell despite stronger data
- German retail sales & manufacturing PMI beat forecasts
The Pound-Euro (GBP/EUR) exchange rate is rising adding to gains last week. The pair rose 0.15% in the previous week, settling on Friday at €1.1553. It traded between €1.1470 and €1.1565. At 15:30 UTC on Monday, GBP/EUR trades 0.06% higher at €1.1559.
The pound is rising against the euro at the start of a new week amid quiet trade as investors turn their attention to the Bank of England interest rate decision on Thursday.
The central bank is widely expected to leave interest rates unchanged at 3.75% following a 25-basis-point cut at the December meeting.
The meeting comes as inflation rose to 3.4% in December, the highest in the Group of Seven leading industrialised nations, and remains well above the Bank of England’s 2% target.
Meanwhile, data show that UK businesses are most likely to raise pay this year by 3%-3.49%. This was slightly more than some Bank of England policymakers are comfortable with, as it could prove an obstacle to returning inflation to the 2% target.
The euro is heading higher against sterling after German retail sales and the eurozone manufacturing activity came in stronger than expected
German retail sales rose 0.1% month on month in December, up from a 0.5% decline in November and above expectations of a 0.2% decline.
Eurozone manufacturing activity contracted at a slower pace in January. The sector remained in contraction for the third consecutive month amid persistent weakness in new orders.
The manufacturing PMI rose to 49.5 in January, up from December’s nine-month low of 48.8, and this was slightly ahead of the preliminary estimate of 49.
The data suggest some progress in the manufacturing sector, though it appears to be slow.
Looking ahead, eurozone inflation figures and the ECB rate decision on Thursday will be in focus.