Pound to Euro Exchange Rate Fails to Capitalise on Federal Reserve News
The Federal Reserve taking a more hawkish than expected stance on US monetary policy last night and boosting the US Dollar (USD) ultimately didn’t help the Pound Sterling to Euro (GBP/EUR) exchange rate to sustain impressive gains, as the pair has been tumbling since last night.
Since opening this week at the interbank level of 1.12, GBP/EUR has been trending with an upside bias. This has been due to hopes for a no-deal Brexit to be avoided, as well as continued Eurozone growth concerns weighing on the shared currency.
Yesterday evening, GBP/EUR briefly touched on a three month high of 1.13. At the time of writing on Thursday morning though, GBP/EUR had fallen back into the region of 1.12.
The Pound’s (GBP) movement was mixed ahead of today’s upcoming Bank of England (BoE) news, while the Euro (EUR) firmed rather than being driven lower by strength in its rival the US Dollar (USD).
Pound (GBP) Exchange Rates Mixed as Investors Await Bank of England (BoE) News
While the Pound (GBP) has trended higher this week overall, it has been unable to hold its best level due to some weak UK data, as well as a lack of optimistic developments over Brexit.
Yesterday’s UK Consumer Price Index (CPI) inflation rate data fell short of forecasts in most major prints. The yearly figures showed inflation at their lowest levels since 2016, the year of the Brexit vote.
The data doused remaining hopes that the Bank of England (BoE) could remain relatively hawkish on monetary policy. In fact, speculation of a more dovish BoE could keep pressure on Sterling as well.
According to Ipek Ozkardeskaya, Senior Market Analyst at London Capital Market:
‘The Bank of England (BoE) is expected to maintain its monetary policy unchanged at today’s meeting, as Governor Mark Carney will continue assuming an orderly Brexit while keeping an eye on the looming downside risks.’
Euro (EUR) Exchange Rates Boosted by Rivals despite Underwhelming Eurozone Inflation
Yesterday’s Eurozone CPI inflation report largely met forecasts, but the forecasts didn’t give investors much to be bullish about either. On top of this, the monthly inflation rate rose to just 0.1% rather than the expected 0.2%.
Overall, the data supported the European Central Bank’s (ECB) recent easing policy, and did little to support the Euro (EUR) outlook.
The Euro has instead been supported by other global factors. The Federal Reserve and Bank of Japan (BoJ) both avoided taking a more dovish tone, bolstering hopes that the global economy is resilient.
On top of this, Norges Bank actually hiked Norway’s interest rates. Since Norway’s economy is close to the Eurozone’s, this news supported the Euro as well today.
Pound to Euro (GBP/EUR) Exchange Rate Awaits Bank of England (BoE) and Eurozone Confidence
Today will see some of the week’s most influential UK news, as the Bank of England (BoE) will be holding its September policy decision.
Amid a week largely lacking in notable Brexit developments, the news could cause a shift in Pound trade if it surprises investors.
Investors do not expect any change in monetary policy from the bank, but the way the bank reacts to recent UK data as well as the rise in no-deal Brexit fears could cause bets and Pound movement to shift.
The BoE may become more dovish as a result of this week’s weaker than expected UK inflation and retail sales, which would weaken the Pound.
The Euro (EUR), on the other hand, may not see much shift in movement from domestic news unless tomorrow’s Eurozone consumer confidence data surprises investors.
Surprising developments in Brexit or global geopolitics could also cause Pound to Euro (GBP/EUR) exchange rate movement.