Pound Euro (GBP/EUR) Exchange Rate Slumps as BoE Forecasts Recession

Pound Euro (GBP/EUR) Exchange Rate Extends Losses after BoE Interest Rate Decision

(Updated 16:45 04/08/22)

The Pound Euro (GBP/EUR) exchange rate continued to fall today after the Bank of England’s announcement that it would hiking interest rates by 0.5%.

Increased expectations for further interest rate hikes from the European Central Bank (ECB) may have also pulled the currency pair lower. The ECB’s latest economic bulletin, released today, indicated that the ‘‘further normalisation of interest rates will be appropriate.’

At time of writing the GBP/EUR exchange rate is at around €1.875, which is down roughly-0.6% from this morning’s opening figures.

Pound Euro (GBP/EUR) Exchange Rate Tumbles as BoE Hikes Interest Rates by 0.5%

(Updated 12:18 04/08/22)

The Pound Euro (GBP/EUR) exchange rate has slumped following the Bank of England’s (BoE) interest rate decision. The central bank hiked rates by 0.5% which represents its largest increase since 1997.

The move had been largely priced in the markets however, meaning that the impact of the hike was minimal. The BoE’s downbeat forecasts are the likely cause behind the currency pair’s fall. The central bank predicted that inflation would hit 13%. The most significant forecast however was that the UK would likely fall into a recession in the fourth quarter of 2022.

At time of writing the GBP/EUR exchange rate is at around €1.1891, which is down roughly -0.5% from this morning’s opening figures.

Original article continues below:

Pound Euro (GBP/EUR) Exchange Rate Trends Sideways as Investors Await BoE Interest Rate Decision

The Pound Euro (GBP/EUR) exchange rate is trading within a narrow range ahead of the Bank of England’s (BoE) interest rate decision later today. Limited bets may be keeping the currency pair subdued ahead of the decision.

An uptick to German bond yields could also be capping gains for the pair. On the other hand, GBP/EUR could be underpinned by continued Eurozone recession fears.

At time of writing the GBP/EUR exchange rate is at around €1.1957, virtually unchanged from this morning’s opening figures.

Pound (GBP) Subdued Ahead of BoE Rate Hike

The Pound (GBP) is seeing limited bets as investors await the Bank of England’s interest rate decision. Sterling is seeing some upward movement however amid expectations of a 0.5% rate hike from the central bank.

Markets have increasingly priced in the move after more hawkish signals from BoE Governor Andrew Bailey. Speaking in weeks prior, Bailey hinted that a 0.5% hike was ‘on the table’ and that there would be ‘no ifs or buts’ when it came to bringing inflation back down.

If the central bank goes ahead with the 0.5% interest rate hike then it would be the BoE’s most significant move since 1997.

Sterling’s gains today could be limited amid a fall to activity in the UK’s construction sector. The sector reported its biggest fall in more than two years in July. The PMI fell above forecasts to 48.9.

Euro (EUR) Climbs Despite Consumer Fears of Inflation

The Euro (EUR) is firming against its rivals today despite fears of an imminent Eurozone recession. A recovery to German bond yields may be helping to support the single currency.

A below-forecast fall to German industrial orders may also be propping up the Euro today.

News that Italy is set to approve a significant aid package for businesses and households could lend further support to the single currency today.

The aid worth around €14.3B will go towards limiting the impact of soaring consumer and business costs.

Expectations that the Eurozone economy’s performance is set to worsen may be capping gains for the Euro today, however. The European Central Bank’s (ECB) consumer expectations survey indicated that households were losing faith in the ECB’s ability to curb soaring inflation.

The poll also found that consumers expected prices to grow by 5% over the coming year.

GBP/EUR Exchange Rate Forecast: Will BoE Hike Rates as Forecast?

Sterling investors will be awaiting the Bank of England’s interest rate decision later today for fresh trading impetus. Markets have largely priced in the predicted 0.5% rate hike, meaning that the impact of the decision on the Pound could be marginal.

On the other, if the BoE surprises with a more cautious 0.25% hike then it could see GBP tumble. Additionally, the currency could see additional bets if investors pick up on anything notable concerning forward policy in the MPC meeting minutes.

For the Euro, industrial production figures for Germany could have an impact on the single currency. June’s figures are forecast to fall by -0.3%.

Without any other significant data this week, recession fears amid a potential energy supply crunch and likely to continue to weigh on EUR.

Gareth Monk

Contact Gareth Monk


Related
Do Not Sell My Personal Information