• Pound (GBP) looks to Thursday BoE rate meeting
  • BoE could hike rates by 75 basis points
  • Euro (EUR) is supported by falling gas prices
  • German PPI is due

The Pound Euro (GBP/EUR) exchange rate is edging lower after small gains yesterday. The pair settled +0.1% higher yesterday at €1.1403 after trading in a range between €1.1375 – €1.1435 across the session. At 05:45 UTC, GBP/EUR trades -0.04% at €1.1400.

The pound traded quietly in the previous session as the UK markets remained close in honor of the funeral of HM Queen Elizabeth II.

Today the markets are set to re0-open ahead of what is expected to be a busy week with the Bank of England interest rate decision and the Chancellor of the Exchequer Kwasi Kwarteng’s min-emergency budget.

The BoE will consider whether to hike rates by 50 or 75 basis points; the latter would market the largest rate hike in 33 years as the central bank responds to surging interest rates. With inflation around five times above the BoE’s target level Governor Andrew Bailey is under pressure to ramp up the pace of rate hikes.

Today there is no high impacting UK economic data. All eyes are on the BoE later in the week.

The euro slipped versus the pound but gained versus the USD as investors found some relief in falling European gas prices. European gas prices tumbled over 8% to an almost 2 -month low as energy security fears eased. Europe has stores 86% filled ahead of the start of the heating season, amid great efforts to help the energy crisis.

Today’s attention will also be on German producer price data, which measures factory gate-level inflation. German PPI is expected to remain elevated as it will take time for any fall in energy prices to show up.

European Central Bank President Christine Lagarde is also due to speak and could shed some light on the central bank’s next steps.