- Pound (GBP) is holding ahead of a speech by BoE’s Bailey
- UK grocery inflation eased to 2.4%
- Euro (EUR) is steady despite German PPI falling -3.3%
- ECB is on track to cut in June
The Pound Euro (GBP/EUR) exchange rate is holding steady after four days of gains. The pair rose 0.21% in the previous session, settling on Monday at €1.1703 and trading in a range between €1.1672 and €1.1707. At 10:00 UTC, GBP/EUR trades -0.02% at €1.1701.
The pound is unchanged on Tuesday as investors await comments from Bank of England governor Andrew Bailey and ahead of tomorrow’s inflation figures.
Tomorrow’s inflation data is expected to show that consumer price index cooled to 2.1% year on year in April down from 3.2% in March. This brings inflation within touching distance of the central bank’s 2% target.
The data comes as figures from Kantar showed that UK grocery inflation eased to 2.4% its lowest level since October 2021.
The market will be watching comments from Bank of England governor Andrew Bailey later today amid expectations that the central bank could start cutting rates as soon as next month. Previously, Bailey has said that the central bank will be watching wage growth and inflation figures to decide when it would be appropriate to start cutting rates.
Meanwhile, the euro was also flat after German wholesale inflation cooled by more than expected in April.
Wholesale inflation, as measured by the producer price index, fell -3.3% year on year after falling down -2.9% in March and below the -3.2% that analysts had forecast.
PPI, which is considered a lead indicator for consumer price inflation (CPI), often points to cooling CPI inflation. This means that a decrease in PPI could potentially lead to a decrease in CPI, which could, in turn, impact the GBP/EUR exchange rate.
The data comes as the ECB is expected to cut interest rates next month, although there is some uncertainty about whether it will do so again in July. Yesterday, ECB Isabel Schnabel said that she didn’t consider a rate cut in July an option.
