- The EUR/GBP could weaken since the BOE warned against the expectations of feat cuts and raised its inflation prognosis.
- GFK consumer confidence increased a point A -19 in March, marking its second consecutive monthly increase since -20 in February.
- The president of the ECB, Christine Lagarde, highlighted the economic risks of possible American tariffs.
The EUR/GBP gains ground on Friday after the losses of the previous session, around 0.8380 during the start of the European negotiation. However, the currency pair could face winds against as the sterling pound (GBP) is strengthened after the cautious posture of the Bank of England (BOE) about the cuts of fees and its revised prognosis of the inflation peak for the year.
On Thursday, the BOE maintained interest rates in 4.5% as expected, with eight of the nine members of the Monetary Policy Committee (MPC) voting to keep the costs of indebtedness without changes. A member supported a rate of 25 basic points (PBS), less than both anticipated by market participants.
In the United Kingdom, GFK consumer confidence rose a point A -19 in March 2025, marking a second consecutive monthly increase since -22 in January and -20 in February. The figure exceeded market expectations of -21, but remained in negative territory, highlighting the continuous caution of the consumer.
Meanwhile, the euro (EUR) is still under pressure after the president of the European Central Bank (ECB), Christine Lagarde, warned about the economic risks derived from possible US tariffs. Speaking to the Committee on Economic and Monetary Affairs of the European Parliament, Lagarde said that a 25% tariff on European imports – reamed by US President Donald Trump – could reduce eurozone growth by approximately 0.3% in their first year.
In addition, those responsible for the ECB policy have pointed out the possibility of rate cuts in 2025, citing growing risks of global commercial tensions. Investors now focus their attention on the next Eurozone data, including the balance of the January current account and the March consumer confidence figures that will be published on Friday.
US interest rates
Financial institutions charge interest rates on loans to borrowers and pay them as interest to savers and depositors. They influence the basic types of interest, which are set by central banks based on the evolution of the economy. Normally, central banks have the mandate to guarantee the stability of prices, which in most cases means setting as an objective an underlying inflation rate around 2%.
If inflation falls below the objective, the Central Bank can cut the basic types of interest, in order to stimulate credit and boost the economy. If inflation increases substantially above 2%, the Central Bank usually rises the interest rates of basic loans to try to reduce inflation.
In general, higher interest rates contribute to reinforce the currency of a country, since they make it a more attractive place for world investors to park their money.
The highest interest rates influence the price of gold because they increase the opportunity cost of maintaining gold instead of investing in an asset that accrues interest or depositing effective in the bank.
If interest rates are high, the price of the US dollar (USD) usually rises and, as gold quotes in dollars, the price of low gold.
The federal funds rate is the type to a day that US banks lend each other. It is the official interest rate that the Federal Reserve usually sets at its FOMC meetings. It is set at a fork, for example 4.75%-5.00%, although the upper limit (in this case 5.00%) is the aforementioned figure.
Market expectations on the interest rate of the Federal Reserve funds are followed by the Fedwatch of the CME tool, which determines the behavior of many financial markets in the forecast of future monetary policy decisions of the Federal Reserve.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
