- Pound (GBP) is falling after 4 days of gains
- The UK economic calendar is quiet today
- Euro (EUR) is steady at a 2.5 year low
- ECB is expected to cut rates by 25 basis points
The Pound Euro (GBP/EUR) exchange rate is falling after four days of gains. The pair rose 0.16% in the previous session, settling on Wednesday at €1.2146. It traded in a range between €1.2105 and €1.2161. At 12:00 UTC, GBP/EUR trades -0.2% at €1.2138.
The euro is rising ahead of today’s European Central Bank interest rate decision at 13:15 GMT. The ECB is expected to announce a 25 basis point interest rate cut, taking redeposit rates to 3%. However, some market participants believe the central bank could opt for a larger 50 basis point cut.
The meeting comes as recent data from the eurozone region has highlighted weakness and a deteriorating outlook for growth. While Q3 GDP was 0.4%, recent PMI data has shown business activity contracted, falling to its lowest level in 10 months in November.
Meanwhile, the Sentix investor confidence index was also weaker as political uncertainty weighed on the economic outlook. Investor sentiment has weakened due to ongoing political uncertainty in Germany and the more recent collapse of the French government.
Attention will also be on the ECB’s communication and latest staff projections. A download revision to the inflation forecast and/or dovish rhetoric from ECB president Christine Lagarde could push the euro lower.
The euro trades lower against the pound on expectations that the ECB will be cutting interest rates more aggressively than the Bank of England.
The Bank of England is not expected to cut rates at the meeting in December.
The Bank of England has adopted a more hawkish stance following the New Labour government budget, which is seen as inflationary.
There is no UK economic data due to be released today. Attention will be turning to tomorrow’s GDP figures, which are expected to show that the UK economy grew 0.2% month over month in October after stalling at 0% in September.
