- Pound (GBP) falls for a second straight day
- BoE likely at the end of the hiking cycle
- Euro (EUR) rises ahead of ECB Lagarde’s speech
- Eurozone inflation is due tomorrow
The Pound Euro (GBP/EUR) exchange rate is falling for a second straight day. The pair fell -0.36% in the previous session, settling on Wednesday at €1.1444 and trading in a range between €1.1440 – €1.1488. At 09:00 UTC, GBP/EUR trades -0.16% at €1.1425.
The pound is falling for a second straight day as investors continued to digest yesterday’s weaker-than-expected inflation data. The largest drop in inflation since 1992 and a fall to a level last seen two years ago has fueled expectations that the Bank of England has reached peak interest rates and that the next move by the central bank will be a rate cut.
Bank of England’s policy maker Megan Greene commented today that the inflation data and the slightly weaker-than-expected jobs data earlier this week are good news as far from the central bank’s perspective.
Earlier in the week, UK labour market data showed that vacancies fell by 43,000 in the third quarter, suggesting that some weakness is creeping into the UK labour market. However, wage growth remained stubbornly high at 7.9%, which could drive inflationary pressure.
There is no high-impacting UK economic data due to be released today. Attention will instead turn to UK retail sales, which are expected to be released tomorrow.
The euro is pushing higher for a second straight day, although it is falling against the US dollar as attention turns to a speech by the European Central Bank president Christine Lagarde.
Her comments will be watched closely as they come after the European Commission’s downwardly revised eurozone growth forecasts for both 2023 and 2024. The EC now expects eurozone growth of 9.6% this year, down from 0.8% and 1.2% in 2024, down from 1.3% previously.
Investors will watch to see whether the weaker growth outlook means that ECB president will adopt a more dovish stance.
Looking ahead, there is no eurozone economic data which is due to be released today; however eurozone inflation data, the final reading for October, is set to be released tomorrow and is expected to confirm that inflation cooled to 4.2% year on year down from 4.5%.
Weaker-than-expected inflation could feel bets that the ECB will start to cut rates sooner than the currently expected June 2024.
