- Pound (GBP) falls for a fourth day
- UK construction PMI fell by the most since the pandemic
- Euro (EUR) rises further after German fiscal U-turn
- ECB is expected to cut rates by 25 bps. But what comes next?
The Pound Euro (GBP/EUR) exchange is falling for a fourth straight day. The pair fell 0.15% in the previous session, settling on Wednesday at €1.1948. It traded in a range between €1.1929 and €1.2052. At 11:30 UTC, GBP/EUR is trading -0.15% at €1.1930.
The euro is pushing higher for a fourth straight day ahead of the ECB interest rate decision at 13:15 GMT.
The European Central Bank is widely expected to cut interest rates by 25 basis points, marking its sixth rate cut since starting its monetary policy easing cycle. This would raise the deposit rate to 2.5% from 2.75%.
The main focus will be on what happens next, as this may be the ECB’s final easy decision. While weak grace and inflation at 2.4% could support further cuts from the central bank. Uncertainty surrounding the outlook is increasing amid the prospects of a looming trade war with the US and after a massive fiscal U-turn in Germany.
The announcement of the possible reform to the German debt break could open the door to colossal defence and infrastructure spending, adding inflationary pressures. For these reasons, the ECB is likely to be cautious, and hawks at the ECB could consider it a good time to pause rate cuts.
The pound is under pressure, dropping to its lowest level since January against the euro. Bank of England rate setters are taking a careful approach to further reducing interest rates, having lowered borrowing costs in February for the third time since August.
Meanwhile, the UK construction sector contracted sharply, with the PMI falling to its lowest level since 2020 as house building plummets.
Construction PMI tumbled to 44.6 from 48.1 in January, marking one of the sharpest downturns since the pandemic. Consumer confidence and a lacklustre economic backdrop caused total new orders to increase for the most since May 2020.