- Pound (GBP) fell yesterday on Brexit woes
- BoE’s Cunliffe to speak later
- Euro (EUR) rises as ECB turns more hawkish
- German consumer confidence is due
The Pound Euro (GBP/EUR) exchange rate is rising on Tuesday paring losses from the previous session. The pair fell -0.35% yesterday, settling at €1.1586, after trading in a range between €1.1588 – €1.1659. At 05:45 UTC, GBP/EUR trades +0.13% at €1.1602.
The pound came under pressure in the previous session as Brexit worries weighed on sentiment amid a lack of economic data.
The UK government is pressing ahead with changes to the Northern Ireland protocol despite warnings of legal challenges from the European Union if they go ahead. Relations between the UK and the EU are particularly strained and could potentially result in a trade war between the two sides. This would be damaging and also would bring inflationary pressures, which is far from what the UK needs right now.
With inflation elevated at a 40-year high of 9.1%, the Bank of England forecast that consumer prices will rise to 11% in the coming months.
There is no high-impacting UK data due to be released today. Attention is on BoE speaker Cunliffe who could shed more light on where the BoE is heading with monetary policy. The BoE have hiked rates for the past five meetings and are expected to hike rates again in August.
The euro pushed higher in the previous session boosted by risk-on trading and investor optimism surrounding a speech by European Central Bank President Christine Lagarde.
The ECB’s tone has become more cautious recently with the central bank pre-committing to a rate hike in July, which has now been fully priced in.
Looking ahead German consumer confidence data will be in focus with analysts expecting a further deterioration to -27.7 in July, down from -26. Rising inflation amid surging food and fuel prices amid the ongoing fallout from the Ukraine war is hurting morale.
In addition to the data, ECB’s Lagarde and Lane are also due to speak.