Pound Euro (GBP/EUR) Exchange Rate Rebounds After BoE Intervention

Pound Euro (GBP/EUR) Exchange Rates Advanced Following BoE Intervention

The Pound Euro (GBP/EUR) exchange rate has strengthened this morning following BoE’s emergency intervention in the gilt markets yesterday.

At the time of writing, the GBP/EUR exchange rate is sitting at €EUR1.1207, the pairing gaining 0.4% from this morning’s opening rates.

Pound (GBP) Buoyed by BoE’s Emergency Gilt Intervention

The Pound (GBP) has risen this morning, as the BoE’s intervention in the bond market soothes market jitters.

Wednesday saw the BoE enact an emergency quantitative easing package, purchasing many long-date bonds from the UK Government. By doing this, the BoE seems to have successfully followed through on their intent to ‘restore orderly market conditions’, with the Pound (GBP) shoring up.

This rebound has helped exchange rates rally from the historic lows reached earlier this week in the wake of the UK Government’s mini-budget.

The recovery in Sterling comes despite comments from Prime Minister Liz Truss in a round of local radio interviews on Thursday morning, which signalled a continuation of her plans for fiscal policy, despite the recent turbulence in GBP exchange rates. Truss stated:

‘I have to do what I believe is right for the country and what is going to help move our country forward.’

Government gilts rose by 4.22% shortly after but have since begun to drop again. Today, a speech is expected by BoE Deputy Governor Dave Ramsden which may continue the central bank’s work on easing the government bonds market.

Euro (EUR) Oscillates as Consumer Confidence and Economic Sentiment Falls Further

The Euro (EUR) is experiencing a turbulent trade session today, as the single currency falls against the Pound (GBP), with significant gains made against other peers such as the Australian Dollar (AUD) and Canadian Dollar (CAD).

However, pessimism marks EUR trading today due to further developments in the Russia-Ukraine conflict following the results of ‘sham referendums’ across occupied areas in Ukraine. These results have prompted market fears of further economic conflict between Moscow and Brussels and are weighing heavily upon the single currency.

Furthermore, today’s release of the Eurozone’s economic sentiment index has created pressure on the Euro.

A bigger than expected slump in the economic sentiment index highlights a growing air of pessimism within the bloc for it’s financial future.

Pound Euro Exchange Rate Forecast: Energy Supply Fears to Dampen EUR?

Looking ahead, the Pound Euro exchange rate may extend its gains in the short-term as the Ukraine-Russia conflict continues.

EUR exchange rates will likely remain muted, though a scheduled emergency energy meeting could ease fears over energy supplies which have dogged markets and the Euro.

Friday’s EUR inflation figures could strengthen the Euro. Another increase in inflation this month may boost expectations for the European Central Bank’s (ECB) future interest rate decision.

The Pound’s outlook remains highly uncertain as the Treasury has ruled out bringing forward the medium-term fiscal plan, but as the BoE’s gilt purchasing continues into October, Sterling could improve.

John Mulcahey

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