- Pound (GBP) is falling after two weeks of gains
- UK unemployment & inflation data are due tomorrow
- Euro (EUR) rises despite political uncertainty in France
- ECB rate decision this week
The Pound Euro (GBP/EUR) exchange rate is rising for a second day. The pair rose 0.34% in the previous session, settling on Wednesday at €1.1859 and trading in a range between €1.1818 and €1.1870. At 13:00 UTC, GBP/EUR trades +0.06% at €1.1864.
The pound is falling marginally but remains close to two year highs versus the euro as investors look ahead to inflation and jobs data later in the week.
The pound rallied hard last week after UK GDP data showed stronger-than-expected growth in the second quarter and after hawkish commentary from Bank of England officials as they emerged from the blackout period.
Tomorrow, UK jobs data will be released. The market will be watching wage growth closely, which policymakers have highlighted as an obstacle to cutting rates, along with sticky service sector inflation.
Today, recruiters have warned over challenging hiring market conditions and economic and political uncertainties.
The euro is rising after two weeks of losses as the markets continue to watch developments in France. Attention is also turning to the ECB Right decision later this week.
One week after the snap elections and two weeks before the Olympics start, France is still without a new prime minister or government and is in political chaos. France has no history of coalitions and struggles with the prospect of political compromise.
Looking ahead, the ECB interest rate decision on Thursday will be a key event for the year right this week, even though the central bank is expected to leave rates unchanged at 3.75%. The market will be watching closely for any clues about when the central bank could cut interest rates again, having reduced rates by 25 basis points on June 1st.
While inflation cooled again in June after accelerating in the two months before, sticky service sector inflation and wage growth remain strong, making the ECB policymakers cautious about cutting rates again.
