Pound Euro Exchange Rate Climbs as BoE Governor Gives Evidence

(Updated 16:30 15/11/21)

The Pound Euro (GBP/EUR) exchange rate has rallied towards the end of the day as the Euro has steadily trended downwards, whilst evidence given by Bank of England (BoE) governor Andrew Bailey at a UK Treasury Committee hearing may be prompting upward movement in the Pound.

Bailey has said that all future meetings of the central bank’s Monetary Policy Committee (MPC) are ‘in play’ when it comes to a potential early interest rate rise.

As of time of writing the GBP/EUR exchange rate is at around €1.1764 which is up 0.4% on this morning’s opening figures.

Pound/Euro (GBP/EUR) Exchange Rate Subdued in Face of Brexit Jitters

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range so far this morning as Brexit uncertainty limits the upside potential of Sterling.

As of time of writing the GBP/EUR exchange rate is at around €1.1716, which is up 0.05% from this morning’s opening figures.

Pound (GBP) Continues to Feel Brexit Bite

The Pound (GBP) has fallen against its competitors as the morning’s session opened, with ongoing concerns surrounding the country’s actions over the Northern Ireland protocol continuing to influence Sterling’s movement.

The so-called ‘sausage wars’ are likely to continue to influence the Pound’s movement today amid reports that the UK’s stance has softened within recent weeks. If the UK does invoke Article 16 there are predictions that this could escalate into a full-blown trade war with the EU, likely hampering the post-pandemic recovery of both currencies.

Andrew Bailey, governor of the Bank of England (BoE), is due to give evidence in front of the UK Treasury Committee this afternoon regarding the central bank’s decisions to leave interest rates unchanged last month. Comments by Bailey and the committee could drive moment in the Pound later in the day.

Euro (EUR) Buoyed by Trade Surplus Amid Belarus-Poland Border Dispute

The Euro (EUR) trended downward overnight but regained some lost ground as this morning’s session opened, and is now trading within a narrow range.

Trade data from the Eurozone released this morning may have helped to keep the currency buoyant, as the trading bloc reported a widening to €7.3B from €4.8B. Beating forecasts for a €6.5bn surplus, it has generated some upward movement for EUR.

These figures may help negate some of the headwinds the Euro faces today, as soaring energy costs and a spike in cases of COVID-19 dampen investor confidence in the currency. The ongoing border dispute between Belarus and Poland may also drive fresh movement in the Euro, as the EU has today announced that they will be introducing tougher sanctions to the Belarusian travel sector.

EU foreign policy chief Josep Borell had the following to say on Belarusian leader Alexander Lukashenko’s defiance in the face of further possible sanctions:

‘Lukashenko got it wrong. He thought that by acting in this way he would twist our arm and force us to cancel the sanctions. The opposite is happening’.

Pound Euro Exchange Rate Forecast: Will Rising Inflation Signal Early Rate Hike?

Looking ahead, both currencies will see significant data releases that are likely to affect their chances in the markets this week.

Both the UK and Euro Area will see employment data released on Tuesday. The UK’s unemployment rate is forecast to fall slightly to 4.4%, and employment in the Eurozone is predicted to rise very slightly to 2.2%. If final numbers print as forecast then a weakening of the pound could lead to a dip in the GBP/EUR exchange rate.

Tuesday will also bring GDP growth data for the Eurozone with the second estimate for the third quarter set to confirm a modest acceleration of growth. On Wednesday the trading bloc will see a final reading of its inflation data bloc, and a further forecast rise is likely to prompt a flurry of speculative bets on an early interest rate rise by the ECB.

The UK will also see a final reading of inflation data on Wednesday, with a forecast rise to 3.9% from 3.1%. Similar to the situation the ECB finds itself in, rising inflation is likely to increase speculation of an early interest rate rise from the BoE. This may well in turn drive further movement in Sterling.

Gareth Monk

Contact Gareth Monk