- Pound (GBP) rises after three days of gains
- PM Starmer brushed off challenges to his leadership this week
- Euro (EUR) falls amid a quiet calendar
- Several ECB policymakers see inflation returning to 2%
The Pound-Euro (GBP/EUR) exchange rate is rising after three days of losses. The pair fell 0.21% in the previous session, settling on Tuesday at €1.1470. It traded between €1.1463 and €1.151. At 16:30 UTC on Wednesday, GBP/EUR trades +0.07% higher at €1.1478.
The pound is rising modestly on Wednesday amid easing concerns over Prime Minister Keir Starmer’s position and on optimism of talk of closer ties with the EU.
The pound came under strain earlier in the week as the prime minister’s position appeared under serious threat. However, Starmer pledged to remain in his job, brushing off challenges to his authority and helping to calm the situation.
The pound is also supported by comments from British former finance minister Rachel Reeves, who said she would push for closer integration with the European Union to reduce trade barriers erected by Brexit.
Still, gains in the pound could be limited by expectations that the Bank of England will be cutting interest rates again soon. At the latest meeting, the BoE said it sees inflation falling back to the 2% target by spring this year.
The euro is slipping modestly versus the pound and against the US dollar amid a quiet day on the economic calendar.
Recent comments from ECB policymakers, including President Lagarde, Nagel, and Guindos, suggested that inflation is broadly undershooting the ECB’s target and that euro appreciation is not yet dramatic enough, even as it tests 1.19 against the US dollar to justify future easing. ECB assumptions see EUR/USD around 1.16 to 1.18
Attention will be on ECB chief economist Lane, who speaks tomorrow, and Cipolloni for further clues on the central bank’s next move.
The market is not pricing any further ECB rate cuts this year. The ECB last cut rates in June last year to 2%.
