- Pound (GBP) is rising for a sixth day
- UK economic backdrop remains weak
- Euro (EUR) falls after German GDP contracts -0.2%
- ECB is expected to cut rates
The Pound Euro (GBP/EUR) exchange rate is rising for a sixth straight day. The pair rose 0.15% in the previous session, settling on Wednesday at €1.1944. It traded in a range between €1.1919 and €1.1958. At 10:00 UTC GBP/EUR trades 0.06% higher at €1.1955.
The EUR is heading lower as investors look ahead cautiously to the ECB interest rate decision at 1315 GMT.
The European Central Bank is widely expected to cut interest rates by a further 25 basis points to 2.75% marking the fourth straight interest rate reduction.
The move has been broadly telegraphed at the World Economic Forum in Davos with even the hawks at the ECB standing dovish as the region faces stalling growth and a modest rise in inflation.
Inflation rose 2.4% year over year in December, slightly up from the 2% target. However, policymakers said in the minutes of the December meeting that they expect inflation to return to the 2% target by the middle of this year.
With growth stalling as PMI data measuring business activity hovers around the 50 level and Germany’s GDP contracting y -0.2%, the central bank will be more focused on trying to stimulate growth. As the rate cut is priced in, commentary from ECB President Chritine Lagarde will drive the EUR. The central bank is expected to continue cutting rates across the year.
The pound is trading unchanged amid another quiet day on the economic calendar.
The pound is inching higher against the EUR, but it is falling against the USD after Chancellor Rachel Reeves’ initiatives to fuel growth in the UK failed to inspire much optimism.
The economic backdrop remains weak as companies cut jobs and hold off hiring following the October budget, which saw the tax burden companies increase through rising national insurance contributions and a higher minimum wage.