Pound Sterling Euro (GBP/EUR) Exchange Rate Rises as BoE Leave Rates Unchanged
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate rallied as the Bank of England (BoE) left interest rates on hold. The pairing is currently trading at around €1.1864.
The country’s central bank decided to leave rates unchanged at 0.75% despite weaker economic data.
However, the decision was not unanimous, with two policymakers (Michael Saunders and Jonathan Haskel) voting in favour of rate cuts.
Pound Sterling Euro (GBP/EUR) Exchange Rate Muted as Eurozone Economic Climate Brighter
UPDATE: The Pound Sterling Euro (GBP/EUR) exchange rate was left muted later on Thursday morning. The pairing is currently trading at around €1.1812.
Data from the Eurozone showed the economic climate warmed in January as manufacturing confidence jumped to its highest level since August.
Eurostat also showed the bloc’s unemployment rate fell in December to the lowest level in over a decade.
Added to this, economic sentiment in the 19-country bloc rose to a higher-than-forecast 102.8 in January. This provides further evidence the economy may have a strong start to 2020.
The improvement was fuelled by increased confidence in increased confidence in industry as factory managers were positive about production expectations.
The upbeat business mood could signal a stronger economy in the first quarter of this year, as the bloc waves goodbye to a year of disappointing growth.
However, this could do little to buoy the single currency against the Pound.
Pound Sterling Euro (GBP/EUR) Exchange Rate Falls as German Job Market Remains Resilient
The Pound Sterling Euro (GBP/EUR) exchange rate slumped ahead of the Bank of England (BoE) meeting. This left the pairing trading at around €1.1787.
The single currency edged higher as pressure from the upcoming BoE meeting weighed on Sterling.
Meanwhile, German unemployment unexpectedly fell in January, suggesting the job market remained resilient.
The German labour market has been supporting the economy in the face of a recession in the manufacturing sector.
While markets expected a rise in unemployment, the number of people out of work fell by 2,000 in the bloc’s largest economy.
Commenting on this morning’s data, Federal Labour Office head, Detlef Scheele noted:
‘The economic weakness continues to leave its mark on the job market. Overall, however, it was also robust at the beginning of the year.’
BoE Rate Cut Fears Weigh on Sterling (GBP)
Expectations of a Bank of England (BoE) rate cut is currently standing at around 50%. This is down from an estimate of 70% at the start of last week.
Robust British data from last week caused investors to lower the chance of a rate cut, although today’s decision is likely to move GBP whichever way the bank decides to go.
In Governor Mark Carney’s final policy meeting, the BoE is currently closer to cutting rates than it has been in the last three years.
After this afternoon’s announcement, the bank will be led by Andrew Bailey, and current economic data suggests the bank could continue a wait-and-see approach.
Commenting on this, BNP Paribas economist, Paul Hollingsworth noted:
‘We suspect a majority on the MPC will want to wait for more hard data, and to see the extent of any fiscal response in the March budget.’
Pound Euro Outlook: Bank of England in Focus
Looking ahead, the Pound (GBP) could slump further against the Euro (EUR) following the Bank of England’s (BoE) monetary policy meeting.
If the bank cuts rates and Governor Carney is dovish about the outlook for the economy in his final speech as Governor, Sterling sentiment will slide.
Meanwhile, better than expected German inflation could provide the single currency with support.
If January’s flash inflation rises higher than expected, it will send the Pound Euro (GBP/EUR) exchange rate lower.