Pound Sterling Euro (GBP/EUR) Exchange Rate Flat despite Lower Chance of BoE Rate Cut
The Pound Sterling Euro (GBP/EUR) exchange rate remained flat on Wednesday morning, leaving the pairing trading at around €1.1773.
Sterling rose to its strongest level against the Euro in close to two weeks, as investors continued to debate the likelihood of a Bank of England (BoE) rate cut.
With the chances of next week’s central bank meeting resulting in a rate cut decreasing, GBP has been able to make gains against a handful of currencies.
Investors are looking ahead to Friday’s PMI data as this could swing the case for a rate cut in one way or another.
Commenting on this, Berenberg’s senior economist, Kallum Pickering said:
‘I struggle to make a strong case for a January rate cut.
‘Much of the data, which is weak, is pre-election so what will matter more to the Bank of England is the PMI data on Friday.’
Yesterday: Sterling (GBP) Gains on Strong Job Growth
Sterling remained flat against the Euro after rising on Tuesday following the release of strong UK labour market data.
GBP rose on Tuesday as British job growth was the strongest in almost a year in the quarter to November.
Pound sentiment increased as it weakens the case for an interest rate cut from the Bank of England (BoE).
The number of Britons in work increased by a stronger-than-forecast 208,000.
According to Capital Economics economist, Thomas Pugh, the central bank is giving more weight to labour market statistics than usual to determine the state of the British economy.
He added:
‘As such, the rebound in employment and slightly softer pay growth will give the MPC another reason not to cut rates from 0.75% to 0.50% at their next meeting.’
While, three BoE policymakers have noted that further stimulus is likely to be needed, many analysts believe the bank will hold off on cutting rates.
Commenting on this, Nomura analyst, Jordan Rochester said:
‘Risk reward is not in favour of chasing GBP lower into a rate cut: With the BoE rate cut priced with a 66% chance, the risk reward is that they delay their decision until later this year to evaluate how the data and fiscal stimulus plays out.’
Pound Euro Outlook: ECB in Focus
The Euro (EUR) is likely to remain under pressure against the Pound (GBP) as the European Central Bank’s (ECB) monetary policy meeting approaches.
If the bank is overly dovish about the outlook for the Eurozone, single currency sentiment will slide.
Meanwhile, the Euro could receive a further blow from January’s flash consumer confidence figures.
If data shows that consumers within the bloc continue to remain pessimistic and confidence falls further, the Pound Euro (GBP/EUR) exchange rate will rise.