- Pound (GBP) is unchanged after losses yesterday
- House prices are expected to rise 3.5% this year
- Euro (EUR) is unchanged after German GDP contracts -0.2%
- German coalition talks start
The Pound Euro (GBP/EUR) exchange is falling for a second straight day. The pair fell 0.14% in the previous session, settling on Monday at €1.2058. It traded in a range between €1.2038 and €1.2115. At 11:30 UTC, GBP/EUR is trading -0.02% at €1.2056.
The pound is falling as investors consider a mixed outlook. On the one hand, millions of Britons Will be paying higher costs after the regulator Ofgem increased its domestic price cap by 6.4% due to soaring wholesale energy prices. This move could potentially lift inflation, which rose to 3% year on year in January and is expected to peak at 3.8% in the third quarter of this year, according to the Bank of England.
Meanwhile, on a more positive note, British home prices are expected to increase faster than previously expected this year. The housing market is expected to receive a boost from the central bank, which is expected to cut rates by a further 75 basis points to 3.75% by the end of this year. Lower borrowing costs could increase UK home prices by 3.5% this year.
The euro is holding steady despite an ongoing slump in the German economy. Q4 GDP data confirmed a -0.2% contraction in the eurozone’s largest economy in the final three months of 2024. Germany’s outsized manufacturing sector has struggled to adapt to new realities after Russia’s war in Ukraine disrupted its business model, which was built on cheap energy, and as Chinese demand faltered.
The data comes as Donald Trump returns to the White House, which also brings with it the threat of global trade wars. Trump has threatened tariffs on automobiles entering the US, which would be bad news for German automakers.
Meanwhile, German coalition talks have kicked off but may take some time. New chancellor Friedrich Merz’s conservative party won the weekend election, and he aims to form a government by Easter.
