- Pound (GBP) has weakened on falling BoE bets
- The central bank is likely near the end of its hiking cycle
- Euro (EUR) digests ECB messages
- German consumer confidence data is due
The Pound Euro (GBP/EUR) exchange rate is holding steady after losses yesterday. The pair fell -0.25% in the previous session, settling on Tuesday at €1.1497 and trading in a range between €1.1485 – €1.1538. At 06:35 UTC, GBP/EUR trades +0.02% at €1.1500.
The pound fell lower against its major peers on Tuesday as investors become increasingly convinced that the Bank of England has reached the end of its monetary policy tightening campaign after leaving interest rates unchanged in the previous week.
One year on from the trust government unveiling a mini-budget that contained £45 billion of unfunded tax cuts and which sent the pound sharply lower ,the mood towards sterling is once again turning negative.
The market is still expecting another 50 basis points of rate hikes going forward, and if that starts to unwind, then we could see the pound come under further pressure.
There was no high-impacting UK economic data yesterday, and there is nothing on the UK economic calendar again today, meaning that sentiment is likely to drive the pound.
The euro rose against the pound but is still weak against the US dollar as investors continue to weigh up messages from the ECB.
Earlier in the week, ECB president Christine Lagarde reiterated the central bank’s determination to bring interest rates back to 2%. She said that the ECB rights will stay restrictive as long as necessary to curb inflation.
The market believes that the ECB has finished its rate hiking cycle but that it will leave rates elevated even as the economy struggles Christina God did not specify how long rates may remain high for.
Looking ahead, attention will turn to German JFK consumer confidence, which is expected to deteriorate further in September to -26 from -25.5. Weak consumer confidence often goes hand in hand with households that are nervous about spending.
