- Pound (GBP) is rising for a fourth day
- FTSE 100 rose to a record high
- Euro (EUR) is falling after inflation cooled to a 16-month low
- German CPI inflation data is on Friday
The Pound-Euro (GBP/EUR) exchange rate is rising for a fourth day. The pair rose 0.09% yesterday, settling on Tuesday at €1.1458. It traded between €1.1435 and €1.1487. At 15:30 UTC on Tuesday, GBP/EUR trades 0.18% higher at €1.1479.
The pound is rising amid a risk-on market mood, with the UK FTSE 100 index hitting a fresh record high despite public inflation expectations falling in January.
The UK index rose to a new record high, boosted by HSBC earnings and strength in mining stocks, highlighting the upbeat market mood.
According to a monthly YouGov survey, the British public expects inflation over the coming year to fall sharply. Short-term inflation expectations fell to 3.3% in February, down from 3.8% in January, whilst long-term expectations fell to 3.6% from 4.1%.
The data comes after Bank of England governor Andrew Bailey Testified before the Treasury Select Committee yesterday and raised expectations that the central bank will cut interest rates in the March meeting.
The Bank of England left rates unchanged in a tighter-than-expected vote in the February meeting at 3.75%.
Looking ahead, the UK economic calendar is quiet tomorrow, but attention will be on the Gorton and Denton by-election, which could highlight political weakness for Prime Minister Keir Starmer.
The euro is falling, dragged down by confirmation that inflation in the eurozone fell to a 16-month low in January, according to Eurostat’s final estimates.
Inflation as measured by CPI came in at 1.7% last month, down from 2% in December and in line with preliminary estimates released 3 weeks ago.
This also marked the first CPI print below the ECB’s 2% target rate since May 2025.
Weaker inflation came as energy prices across the region fell by 4% year on year in January following a 1. 9% drop in December.
The data support the view that the ECB will leave interest rates unchanged this year.
Looking ahead, attention will turn to Friday’s German CPI data for February.