The pound sterling continues to fall against the euro in the run-up to Thursday’s Bank of England decision.
A similar weakness was noticed in the days before previous Bank of England decisions. This means that the Bank frequently shows a reluctance to raise interest rates when necessary, but a strong desire to lower rates at the first opportunity.
Markets are now completely pricing in 50 basis points of easing in the UK by year-end, with the first rate decrease likely in August. However, there was no evident reason for the shift.
Currency-wise, the key FX pairings remained in extremely tight ranges throughout yesterday. Among the modest price activity to date, the lowering of UK market rate forecasts weighed on sterling.
German industrial production data was issued earlier this morning. It indicated that output fell by 0.4% in March (against -0.6% forecast).
However, the announcement had no influence on the euro in early trading. The macro calendar for the rest of the day remains very sparse on both.