GBP/EUR Exchange Rate Skyrockets as BoE’s Hawkish Outlook Cheers Pound

GBP/EUR Exchange Rate Surges on BoE’s Upbeat Outlook

The Pound to Euro (GBP/EUR) exchange rate is accelerating quickly this morning after the Bank of England (BoE) revised its growth forecasts sharply higher.

At the time of writing the GBP/EUR exchange rate is trading at around €1.1113, up roughly 0.5% from this morning’s opening levels.

Pound (GBP) Soars on BoE’s Upgraded Forecasts

The Pound (GBP) is surging against the Euro (EUR) this morning in the wake of the Bank of England’s latest rate decision.

The BoE voted unanimously to leave its monetary policy untouched this month, with policymakers’ united front helping to dispel negative interest rate speculation and cheering Sterling.

Further buoying GBP exchange rates was the BoE’s latest forecasts, in which it revised its growth forecasts for 2020 from –14% to –9.5% as it noted a stronger-than-expected recovery in the second quarter.

The BoE’s policy statement read:

‘Output rose modestly in May, and is expected to have recovered to a greater extent in June.

‘The fall in output in Q2 is expected to have been less severe than was assumed in the illustrative scenario in the May Report. In that scenario, it was assumed that restrictions would be gradually unwound between early June and late September, but they were lifted earlier.’

The BoE also struck a more positive tone in its forecast for unemployment, predicting it would peak at 7.5% this year rather than nearing 10%.

Euro’s (EUR) Losses Tempered by Record Rise in German Factory Orders

At the same time, the Euro (EUR) has been able to temper its losses against a resurgent Pound (GBP) this morning, thanks to an astonishing surge in German industrial activity.

According to data published by Destatis, German factory order growth exploded from 10.4% to a record 27.9% in June, easily outpacing expectations for a 10.1% expansion.

Carsten Brzeski, Chief Economist at ING Germany, welcomed the surge in new orders, but warned that Germany’s industrial sector is still faces more long-standing issues:

‘The only limiting factor is that order books had already been in a long shrinking process for two years prior to the crisis. These structural issues won’t disappear overnight, but today’s numbers suggest that the industry could catch up with the momentum in the rest of the economy.’

GBP/EUR Exchange Rate Forecast: More Positive German Industrial Data to Boost the Euro?

Looking ahead to the end of this week’s session, the Pound to Euro (GBP/EUR) exchange rate may be forced to walk back some of its recent gains with the publication of more positive industrial data from Germany.

Should tomorrow’s industrial production release print even half as high as today’s factory order figures then the Euro will be well positioned against its peers Friday.

Meanwhile, in the absence of any more notable UK data releases this week, GBP investors may begin to turn their attention to next week’s session and the publication of the UK’s latest GDP estimate.

Economists are forecasting a record 20.4% drop in UK economic growth in the second quarter, confirmation of which is likely to weigh heavily on the Pound next week.

Matthew Andrews

Contact Matthew Andrews