GBP/EUR: Pound Heads Higher As EU To Mull Over Brexit Extension
  • Pound (GBP) rose despite a lack of fresh drivers
  • GS lifts peak interest rate forecast to 5%
  • Euro (EUR) falls after mixed confidence
  • German inflation and eurozone GDP data is due

The Pound Euro (GBP/EUR) exchange rate is rising for a second straight day. The pair rose +0.36% in the previous session, settling on Wednesday at €1.1329, after trading in a range between €1.1270 – €1.1336. At 05:45 UTC, GBP/EUR trades +0.06% at €1.1336. The pair is set to rise 0.2% across the week, the second straight week of gains.

The pound pushed higher in the previous session despite a lack of fresh fundamental drivers. Still, with inflation is sat in double digits, the Bank of England is widely expected to raise interest rates again in order to tame inflation.

Investment bank Goldman Sachs raised it peak interest rate forecast for the Bank of England to 5%, up 0.75% from the current rate of 4.25%. This implies that the central bank will raise interest rates three times more before hitting the peak.

It has been a quiet week for economic data, but investors have been digesting results from UK banks such as Barclays yesterday find NatWest today. The results have calmed any lingering worries about stability in the banking system.

The euro fell yesterday after mixed eurozone confidence data. On the one hand, consumer confidence improved in lines with expectations to -17.5 up from -19.5. However, business sentiment improve at a slower pace than expected to 99.3, up from 99.2.

Today the focus remains on the economic calendar, with eurozone GDP data as well as German inflation figures under the spotlight.

The eurozone economy is expected to have grown 0.2% QoQ in the first quarter of this year after stagnating at the end of last year.

Meanwhile, German inflation is expected to cool slightly to 7.3% year on year down from 7.4% year on year in March. This would show that inflation in the eurozone’s largest economy is proving to be stickier than expected.

The data comes as the European Central Bank is considering raising interest rates by 25 or 50 basis points in the upcoming central bank meeting next month.