- Pound (GBP) falls after 2 days of gains
- CPI eases to 2.8% YoY from 3%
- Euro (EUR) gives up earlier gains
- Concerns over trade tariffs pulls EUR from earlier highs
The Pound Euro (GBP/EUR) exchange is falling after two days of losses. The pair fell 0.04% in the previous session, settling on Tuesday at €1.1993. It traded between €1.1955 and €1.1999. At 19:30 UTC, GBP/EUR is trading -0.04% at €1.1989.
The pound is falling after UK inflation cooled by more than expected and after the Chancellor’s Spring Statement.
UK inflation, as measured by the Consumer Price Index, cooled to 2.8% year-on-year in February, down from 3% in January. This was below the 2.9% that economists had forecast. Meanwhile, core inflation, which excludes more volatile items such as food and fuel, cooled to 3.5% annually, down from 3.7% and below forecasts of 3.6%.
Delving deeper into the figures, service sector inflation, which is closely watched by the Bank of England, remained sticky at 5%, defying expectations of a fall to 4.9%.
Following the data, the Chancellor, Rachel Reeves, unveiled her Spring Statement, which brought few surprises. The Office for Budget Responsibility reduced its growth forecasts to 1% from 2%, a move widely anticipated. Reeves also announced sweeping spending cuts, which were again widely expected.
The Spring Statement is not expected to have much of an impact of the BoE rate cuts this year. The market continues to price in two more rate cuts this year.
The euro is rising against the pound but is falling further against the USD amid a quiet economic calendar. Attention was on a speech by European Central Bank policymaker Villeroy de Galhau, who said that he sees further rate cuts coming. He does not believe that Trump’s trade tariffs will have an inflationary impact in the region and expects inflation to cool to 2% by summer.
Looking ahead, ECB President Christine Lagarde is due to speak tomorrow.
Despite Villeroy’s comments, jitters surrounding potential tariffs on EU imports as soon as next week are putting pressure on the EUR.
