Pound Euro Exchange Rate Hits Fresh Five-Month Low as Post-BoE Slide Continues

Pound Euro (GBP/EUR) Exchange Rate Extends Downside on Bleak BoE Outlook

(Updated 15:00, 6/5/22) The Pound Euro (GBP/EUR) exchange rate continues to struggle today after the Bank of England (BoE) interest rate decision yesterday saw the currency pair plunge to a five-month low

The BoE’s dire economic outlook for the UK, paired with lower rate hike expectations, remains a significant headwind for Sterling. As a result, GBP/EUR has slipped to a new five-month low. 

How could GBP/EUR perform next week?

Original article continues below:

Pound (GBP) Continues to Fall as Markets Grapple with BoE Forecasts

The Pound (GBP) remains under pressure today after yesterday’s BoE announcement saw GBP/EUR tumble by 1.5 cents. 

The UK central bank downgraded its growth forecasts, with the UK economy perilously close to a recession. In addition, the BoE now expects inflation to peak at over 10% in the autumn, when the energy price cap rises once again. 

The latest projections suggest that the UK economy has rough waters ahead. Meanwhile, the cost-of-living crisis is already starting to slow growth and hammer poorer households. 

The news is dominating the headlines today, and continuing to weigh on GBP exchange rates. 

Euro (EUR) Rises despite Poor German Data 

Meanwhile, the Euro (EUR) is managing to strengthen this morning, despite a larger-than-expected decline in German industrial production. 

In March, industrial production in Europe’s largest economy shrank by 3.9%. This was far worse than economists’ predictions of a 1% drop and the largest decline since the start of the coronavirus pandemic. 

Nevertheless, EUR exchange rates are rising, without a clear catalyst. 

The Euro may simply be enjoying flows away from GBP and into EUR during European trade, thereby lifting it across the board. 

Pound Euro Exchange Rate Forecast: Sterling to Remain Under Pressure

The Pound Euro pair could continue its downward trajectory today as the UK’s economic woes remain in the spotlight. 

Sterling also faces some political headwinds as the local election results pour in. The ruling Conservative party has lost a significant number of council seats due to the ‘partygate’ scandal. Votes are still being counted, and the more seats the Tories lose, the more pressure there is on Prime Minister Boris Johnson to resign. This would create more political uncertainty, which in turn could hurt GBP. 

Samuel Birnie

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