- Pound (GBP) falls after 3-days off gains
- UK inflation rose & unemployment held steady.
- Euro (EUR) is rising despite mounting headwinds
- The eurozone PMI data is due tomorrow.
The Pound Euro (GBP/EUR) exchange is falling after 3-days of gains. The pair rose 0.03% in the previous session, settling on Wednesday at €1.2074 and traded in a range between €1.2062 and €1.21. At 17:15 UTC, GBP/EUR is trading -0.12% at €1.2062.
The pound is falling against the euro but gaining against the USD as investors continue to weigh up yesterday’s hotter-than-expected inflation data and amid concerns over the country’s economic outlook. Bank of England governor Andrew Bailey warned that UK economic growth could remain sluggish and also sees the labour market softening.
Today’s sell-off comes after three days of gains for the pound. Data this week showed that the unemployment rate unexpectedly remained at 4.4%, while wage growth accelerated more than expected.
Annual headline inflation also rose by a hotter-than-expected 3% year on year in January, up from 2.5% in December.
Although the acceleration in inflationary pressures should be temporary, it may prevent the Bank of England from easing monetary policy further near-term—the central bank cut rates by 25 basis points in its February meeting.
Despite looming geopolitical risks, the EUR is rising against the pound and the USD. As well as U.S. President Trump’s threat of reciprocal tariffs to the European Union, bringing with it the threat of a trade war, Europe has also been sidelined when it comes to peace talks in Ukraine. Trump is moving forward with bilateral negotiations directly with Russia, removing Ukraine from the picture.
This could mean that any outcome will be less favorable as far as Europe is concerned.
Attention now turns to eurozone PMI data for February, which will be released tomorrow.
Economists expect the manufacturing PMI to improve to 48.5 from 46.6 in January and the services PMI to grow to 51.5, up from 51.3, amid the ongoing divergence in the sectors.
