Pound Euro (GBP/EUR) Exchange Rate Fluctuates amid Bond Market Uncertainty
The Pound Euro (GBP/EUR) exchange rate is volatile this morning, having slumped by a cent overnight after Bank of England (BoE) Governor Andrew Bailey said the BoE would not be extending its bond-buying programme.
At the time of writing, GBP/EUR is trading at around €1.1369, up almost a cent from overnight lows but still half a cent down from before Bailey’s comments.
Pound (GBP) Recoups Losses amid BoE Speculation
The Pound (GBP) experienced some turbulence this morning amid speculation over whether the BoE will extend its emergency bond-buying scheme beyond Friday.
Last night BoE Governor Bailey said that the bank would not extend its gilt-purchasing operation, which brought some stability to markets after the financial turmoil in the aftermath of the government’s mini-budget. Following Bailey’s comments, the Pound slumped.
Today, however, the Financial Times has reported that Bailey privately signalled to bankers that the bank may continue its intervention beyond the Friday deadline, depending on market conditions. These rumours have pushed the Pound higher today, heightening GBP volatility.
Meanwhile, UK GDP data released this morning revealed an unexpected contraction in the UK economy in August amid a slump in manufacturing. The downbeat data raises fresh concerns of a recession, adding to the turbulent trade in UK markets.
Euro (EUR) Subdued amid Russia-Ukraine Concerns
At the same time, the Euro (EUR) is rather muted amid ongoing concerns about the Russia-Ukraine crisis.
Russia has launched missile strikes on multiple Ukrainian cities this week after the attack on the symbolic Crimean bridge over the weekend, with the escalation of the conflict weighing on EUR.
In addition, the continued loss of power at the Zaporizhzhia nuclear plant is troubling analysts. There are reports that Russia is preventing diesel deliveries to the plant, raising fears over nuclear security.
However, Ukrainian forces continue to retake territory, keeping alive the hope that Kyiv will eventually expel the invading forces.
Pound Euro Exchange Rate Forecast: All Eyes on the BoE
As the session unfolds, news about UK fiscal and monetary policy could drive movement in the Pound. If the BoE confirms that it will extend its bond-buying programme, Sterling could strengthen.
Meanwhile, any new announcements from the UK government could also impact GBP. If Number 10 can reassure markets that it is on top of the current fiscal crisis, the Pound Euro exchange rate may tick higher. However, a perhaps more likely outcome is that concerns about the UK economy and financial stability will persist, keeping Sterling subdued.
Later this afternoon, European Central Bank (ECB) President Christine Lagarde is due to speak. The ECB has lagged behind other central banks in raising interest rates and is now scrambling to get inflation under control before the Eurozone experiences an economic downturn. If Lagarde hints at further steep interest rate rises, the single currency could climb.