- Pound (GBP) is rising after a flat day yesterday
- US-Iran peace hopes are revived
- Euro (EUR) is falling but rises versus the USD
- ECB’s Lagarde speaks later today
The Pound-Euro (GBP/EUR) exchange rate is rising after a flat end yesterday. The pair fell 0.01% in the previous session, settling on Monday at €1.1486. The pair traded between €1.1426 and €1.1502. At 12:30 UTC on Monday, GBP/EUR trades +0.15% at €1.1503.
The pound is rising on Tuesday against the euro and the U.S. dollar as the market becomes increasingly hopeful of a resolution to the U.S.-Iran conflict.
News that Tehran could be open to further negotiations, together with President Donald Trump saying that 34 ships have now passed through the Strait of Hormuz, has helped push oil prices back below $100 per barrel. This is important for the pound, given the UK’s dependence on imported energy.
The backdrop appears supportive for sterling, as improving global sentiment distracts from weaker UK domestic fundamentals and political uncertainty.
There is no UK economic data due today; however, Andrew Bailey is scheduled to speak. Markets are currently pricing in up to two rate hikes from the Bank of England this year, although Bailey has previously warned that expectations for a more hawkish policy path may be overdone.
The euro is under pressure against the pound but is rising against the U.S. dollar, supported by improving market sentiment and lower energy prices.
Data showed that Spanish inflation was upwardly revised to 3.4% year-on-year in March, up from a preliminary reading of 3.3% and 2.2% in February, reflecting the pass-through of higher energy costs.
Meanwhile, German wholesale prices also came in stronger than expected, rising 2.7% month-on-month, up from 0.6% in February and above expectations of 0.4%.
Markets are currently pricing in one or possibly two rate hikes from the European Central Bank this year.
ECB President Christine Lagarde is due to speak later today at the IMF meeting, with investors listening closely for guidance on inflation, growth, and the outlook for interest rates.
