- Pound (GBP) is rising adding to modest gains last week
- Chancellor Reeves will unveil spending plans on Wednesday
- Euro (EUR) falls after last week’s rate cut
- The ECB is near the end of its rate-cutting cycle
The Pound-Euro (GBP/EUR) exchange rate is rising, adding to losses from last week. The pair rose by 0.07% in the previous week, settling on Friday at €1.1870. It traded between €1.1830 and €1.1896. At 09:30, GBP/EUR trades 0.07% at €1.1878.
The pound is rising on Monday amid an improved market mood, and as investors look ahead to a busy week for the sterling. In addition to UK jobs data and inflation figures, the market will also be watching UK Chancellor Rachel Reeves’s spending review, which will be announced on Wednesday.
This review will unveil the Labour government’s priorities for the next three years. In the autumn budget, the chancellor announced her plans on where to tax and borrow to fund overall levels of spending. The spending review will explain exactly how that money is divided between government departments. Healthcare and defence are expected to be big winners.
Meanwhile, encouraging news for the Bank of England, typical annual pay settlements offered by British companies in the three months to April fell slightly despite the rise in the minimum wage. The Bank of England has highlighted strong wage growth as an obstacle to aggressive interest rate cuts.
The EUR is drifting lower, extending losses from last week after the ECB cut interest rates by 25 basis points, taking the deposit rate to 2%. ECB president Christine Lagarde noted that the central bank was nearing the end of its rate-cutting cycle, which has offered some support to the common currency.
Plenty of ECB officials are due to speak this week, and the market will be watching their comments closely for clues about when the final rate cuts may be coming.
The eurozone economic calendar is relatively quiet this week. Attention will be on Eurozone Sentix sentiment data today and ZEW economic sentiment figures tomorrow.