- Pound (GBP) is rising for a sixth day
- UK CPI eased to 2.3% in April, down from 3.2%
- Euro (EUR) falls amid a quiet economic calendar
- ECB’s Lagarde signals to a June rate cut
The Pound Euro (GBP/EUR) exchange rate is rising for a sixth straight day. The pair rose +0.06% in the previous session, settling on Tuesday at €1.1710 and trading in a range between €1.1695 and €1.1703. At 10:00 UTC, GBP/EUR trades 0.19% at €1.1732.
The pound is heading higher after UK inflation cooled by less than expected in April.
According to the Office of National Statistics, inflation, as measured by the consumer price index, rose 2.3% year over year, down from 3.2% in March.
While this was the lowest reading since the summer of 2021 and closer to the Bank of England’s 2% target, it was still higher than economists forecast.
Meanwhile, service sector inflation, which the Bank of England is monitoring closely for signs of domestic pressures, was little changed at 5.9%, down modestly from 6% the previous month but still well above the 5.5% expected.
Core inflation, which excludes more volatile items such as food and fuel, fell to 3.9%, down from 4.2% ahead of forecasts of 3.7%.
The hotter-than-expected UK inflation reading for both headline and services is pushing back Bank of England rate cut expectations. August is now looking likely as the starting month for the easing cycle, which has been pushed back from expectations of a June start to rate cuts prior to the data release. The market is fully pricing in the first 25 basis point rate cut in November.
The euro is falling against the stronger pound but holds steady against the US dollar amid a quiet day for the eurozone economic calendar.
With no high-impacting eurozone data due to be released, investors are digesting ECB president Christine Lagarde’s comments.
The president of the central bank sent strong signals that rate cuts are expected in the June meeting. She said she’s confident that inflation is now under control.
Her comments come as eurozone inflation reached 2.4% in April and is expected to reach the ECB’s goal of 2% in the second half of next year.
Even so, the ECB is expected to cut rates three times across 2024.
