- Pound (GBP) falls after yesterday’s gains
- Inflation expectations cooled to 3%
- Euro (EUR) rises despite the ECB talking about rate cuts
- The ECB signaled a June cut
The Pound Euro (GBP/EUR) exchange rate is falling at the start of the week. The pair fell -0.14% in the previous session, settling on Thursday at €1.1751 and trading in a range between €1.1667 €1.1762. At 14:00 UTC, GBP/EUR trades -0.14% at €1.1734.
The pound is falling after gains in the previous session and is still on track to lose across the week as investors assess when the Bank of England may start to cut interest rates.
Data this week showed that the UK labour market is weakening, and wage growth is slowing, which could encourage the Bank of England to start cutting interest rates earlier than previously expected.
Figures today showed that UK inflation expectations for the next 12 months eased to 3%, down from 3.3%, marking the lowest level since August 2021.
The data comes as consumer price inflation was 4% in January and December, which is double the Bank of England’s target level. Inflation data is due on Wednesday and is expected to show it eased further to 3.6% in February.
The central bank will meet next week, but policymakers are expected to leave rates unchanged. Instead, investors will be watching closely for any clues over the timing of the first-rate cut, which could come as soon as June, according to analysts at Citigroup. They had previously been expecting an August cut.
The euro is edging higher despite a lack of fresh data for investors to digest. This week has been a very quiet week as far as economic data is concerned, with just German inflation showing that it had cooled to a two-year low of 2.5% at the start of the week.
Instead, this week’s focus has been on ECB policymakers who have signaled to a rate cut in June, in line with ECB president Lagarde last week.
Today, an ECB policymaker, Olli Rehn, said that the central bank has started to discuss rate cuts.
Attention is shifting to ECB chief economist Philip Lane, who’s due to speak. Investors will be watching for signs that a June rate cut is coming.
