- Pound (GBP) is rising for a third day
- BoE cut rates by 25 bps to 4.25% but the vote was more hawkish
- Euro (EUR) falls amid mixed cues
- German industrial production rose
The Pound-Euro (GBP/EUR) exchange rate rose for a third straight session. The pair rose 0.01% in the previous session, settling on Wednesday at €1.1758. It traded between €1.1731 and €1.1795. At 21:30 GBP/EUR trades 0.33% at €1.1797.
The pound rose against the euro but not against the U.S. dollar after the Bank of England cut interest rates for a fourth time, reducing rates by 25 basis points to 4.25%. The vote split was 7 to 2, making it more hawkish than the 9 to 0 that the market was expecting. Two policy members voted to leave rates on hold, which overshadowed the fact that two policy makers also voted for a deeper 50 basis point rate.
The Bank of England slightly lowered its inflation forecast to peak at 3.5% in Q3, down from 3.7%. The central bank also lifted its 2025 growth forecast to 1% after a strong first quarter; however, the central bank sees Trump’s tariffs impacting growth in 2026, where it lowered its growth forecast.
Following the meeting, the market is not pricing in a rate of 3.7% this year, up from 3.6%, which suggests slightly less easing.
The central bank kept the reference to gradual and careful rate cuts, disappointing some who thought the BoE could remove it.
Separately, the US and UK announced a trade agreement. While the details need to be worked out, the agreement includes provisions for aluminium, steel, cars, and agriculture.
The euro is falling against the pound on the US dollar amid mixed cues. While optimism surrounding the election of Friedrich Merz as Chancellor in Germany is helping to support the euro, recent data has been more mixed. German industrial production rose 3% MoM in March as firms front-loaded ahead of trade tariff announcements. However, eurozone retail sales were weaker than expected.
