Pound to Euro (GBP/EUR) Exchange Rate Sinks as Bank of England Poised to Ramp up Stimulus Measures

GBP/EUR Exchange Rate as BoE Interest Rate Remains in Focus

The Pound to Euro (GBP/EUR) exchange rate fell by -0.5% today, with the pairing currently trading around €1.11.

Sterling suffered as the Bank of England (BoE) is expected to ramp up its stimulus measures to strengthen the British economy’s recovery. The BoE is will likely expand its QE programme. Interest rates are forecast to hold at 0.1%.

Meanwhile, the BoE is also expected to increase its bond-buying programme by a sizeable £150 billion.

Emma Wall, head of investment analysis at Hargreaves Lansdow, commented:

‘Once that comes to an end, the downward pressures on inflation, the unemployment, the economic situation will be a lot more stark, and so they are really having to be thinking not just about this month, but the coming six months and what needs to be done to support the economy through that transition.’

As a result, we could see the GBP/EUR exchange rate sink as prospects for Britain’s economic recovery continue to darken.

Meanwhile, fears of a possible no-deal Brexit are weighing on the Pound today. This follows the European Parliament’s warning that it would not consent to a watered-down trade deal between the UK and the EU.

Euro (EUR) Rises Despite Growing Concerns for Eurozone’s Economic Recovery

The Euro (EUR) rose against Sterling today despite single currency investors becoming increasingly more pessimistic about the Eurozone’s economic recovery.

This follows comments from the European Central Bank’s (ECB) President, Christine Lagarde. Mme. Lagarde said that the ECB is now adhering to its most pessimistic forecasts for the bloc.

Yesterday also saw the Eurozone’s inflation figures for May confirm fears and drop to four-year lows.

Claus Vistesen, chief eurozone economist at Pantheon Macroeconomics, commented that while energy inflation will remain in the doldrums, a resurgence in oil prices could help buoy inflation in the months ahead.

Mr. Vistesen added:

‘Details suggest that inflation in personal care services, such as hairdressing, and in some restaurants and other hospitality services rose as lockdowns were lifted, but it’s too early to see whether this will be sustained.’

Pound to Euro (GBP/EUR) Outlook: Could Rising Retail Sales Buoy Sterling?

Pound (GBP) investors will be looking ahead to tomorrow’s release of the latest UK retail sales figures for May. As a result, we could see GBP head higher if the retail sector improved last month.

Tomorrow will also see the release of May’s UK public sector net borrowing figures for May. With the figure set to ease from £61.4 billion to £47.3 billion, we could see Sterling benefit.

Meanwhile, Euro (EUR) investors will be awaiting tomorrow’s release of Germany’s producer price index for May. However, if this continues to deteriorate, we could see the single currency suffer.

The GBP/EUR exchange rate will however remain subdued throughout the rest of this week. Now post-Brexit uncertainty has returned, and economic uncertainty rises, the GBP is likely to continue to head downward.

David Moore

Contact David Moore