Pound Euro (GBP/EUR) Exchange Rate Nosedives after Cautious Comments from BoE’s Bailey
(Updated 13:46 01/03/23)
The Pound Euro (GBP/EUR) exchange rate has deepened its losses today. The further losses for the pairing have likely been prompted by a speech from Bank of England (BoE) Governor Andrew Bailey.
Speaking at Brunswick Group event today, Bailey indicated that the BoE’s policy tightening path less certain than first though. Bailey also indicated that further rate hikes were not certain.
In regards to Bailey’s speech Pantheon Macroeconomics’ chief UK economist Samuel Tombs said:
‘It is clear from Mr. Bailey’s speech that the Committee is placing more emphasis on the substantial tightening already delivered and would like to call time on its hiking cycle as soon as it feasibly can.’
The speech prompted markets to pare back bets on a 25bps rate hike from the central bank at their next meeting. This change in expectations may have prompted the losses in GBP/EUR.
At the same time, a stronger-than-expected German inflation print is buoying European Central Bank (ECB) rate hike expectations and underpinning demand for the Euro.
At time of writing the GBP/EUR exchange rate is at around €1.1268, which is down roughly 0.9% from this morning’s opening figures.
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Pound Euro (GBP/EUR) Exchange Rate Slips as UK Housing Market Struggles
(Updated 08:53 01/03/23)
The Pound Euro (GBP/EUR) exchange rate is ticking lower today. Further evidence of a downturn in the UK’s hosuing market could be weighing on the pairing today.
Figures collected by Nationwide showed annual house price growth moving into negative territory for the first time since June 2020. The data added to fears of potracted recession in the UK.
Robert Gardner, Nationwide’s chief economist, said:
‘It will be hard for the market to regain much momentum in the near term since economic headwinds look set to remain relatively strong, with the labour market widely expected to weaken as the economy shrinks in the quarters ahead, while mortgage rates remain well above the lows prevailing in 2021.’
Hawkish comments from multiple European Central Bank officials may also be keeping pressure on GBP/EUR today.
Speaking on Wednesday, ECB board member Madis Muller stated that ‘expectations of rapid ECB rate cuts are wishful thinking’.
At time of writing the GBP/EUR exchange rate is at around €1.1345, which is down roughly 0.3% from this morning’s opening figures.
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Pound Euro (GBP/EUR) Exchange Rate Bolstered by Hawkish BoE Rhetoric
(Updated 14:25 29/02/23)
The Pound Euro (GBP/EUR) exchange rate has continued to edge higher today. The pairing is likely continuing to benefit from optimism surrounding the UK-EU Northern Ireland Deal.
Hawkish comments from Bank of England (BoE) policymakers may also be pushing the exchange rate higher. Speaking today, BoE board member Catherine Mann hinted at the need for further rate hikes despite falling energy prices.
GBP/EUR’s gains may be capped by a persistently cautious market mood, however.
Further gains for GBP/EUR may be limited by a persistently cautious market mood, however.
At time of writing the GBP/EUR exchange rate is at around €1.1402, which is up roughly 0.3% from this morning’s opening figures.
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Pound Euro (GBP/EUR) Exchange Rate Edges Higher amid Improving UK-EU Relations
The Pound Euro (GBP/EUR) exchange rate is firming today. The pairing could be seeing gains amid renewed confidence in UK-EU relations following the unveiling of the ‘Windsor Framework’.
Bank of England (BoE) rate hike bets may also be boosting GBP/EUR today.
At time of writing the GBP/EUR exchange rate is at around €1.1385, which is up around 0.2% from this morning’s opening figures.
Pound (GBP) Climbs as Markets Digest UK-EU NI Deal
The Pound (GBP) is rising today. Sterling is likely seeing fresh bets amid optimism surrounding the post-Brexit ‘Windsor Framework’ trade deal.
The agreed deal between the UK-EU is set to reduce checks on goods moved between Northern Ireland and the rest of the UK. UK Prime Minister Rishi Sunak described the deal as ‘incredibly attractive’.
ING economists Pesole, Turne, Taborsky had the following to say on the deal’s impact on Sterling:
‘The direct impact on the UK economy should not be significant, but markets are probably welcoming the conciliatory steps in UK-EU trade relationships.’
GBP may also be finding support from bets on a further raise in interest rates from the BoE. Markets are pricing in a 25bps hike at the central bank’s next meeting.
Euro (EUR) Bolstered by Persistent ECB Rate Hike Bets
The Euro (EUR) is firming against many of its peers today amid a broadly cautious market mood. EUR is struggling to make gains against the Pound, however.
Optimism surrounding the Eurozone economy may be bolstering EUR. Speaking today, European Commissioner for Economy Paolo Gentiloni stated that the EU ‘is likely to avoid a severe recession’.
Expectations of further interest rate hikes from the European Central Bank (ECB) may also be pushing the Euro higher. A rise in French and Spanish inflation today may be adding to pressure on the ECB to pursue further tightening.
Speaking to Reuters in an interview published on Tuesday, ECB Chief Economist Philip Lane signalled that the ECB would continue to push ahead with further interest rate hikes.
GBP/EUR Exchange Rate Forecast: Will BoE Governor Bailey Hint at Further Rate Hikes?
Looking ahead to the week for the Pound, a speech from BoE Governor Andrew Bailey could drive further movement in Sterling. Signs of further policy tightening could boost GBP.
Also on Wednesday, the final reading of February’s manufacturing PMI could have a mixed effect on Sterling. The data is expected to confirm a downturn in the sector which could weigh on GBP. The pace of the fall is forecast to cool, however.
The final reading of February’s PMI for the UK’s dominant services sector could provide a welcome boost to Sterling. Friday’s figures are set to confirm the sector’s first positive reading since July.
For the Euro, a forecast uptick in Germany’s February unemployment rate could see the Euro drop. The evidence of a cooling labour market may also prompt a pullback in ECB rate hike bets.
An expected drop in Germany’s February inflation could have a similar effect on EUR on Friday. Inflation is set to slip to 8.5% in the trading bloc’s largest member.
Thursday is set to bring data releases for the Eurozone. February’s Eurozone inflation is also expected to fall to 8.2% from 8.6%. The data release could also see markets price in a slow pace of policy tightening from the ECB. This may keep pressure on the Euro.
Also on Thursday, Eurozone unemployment is expected to remain unchanged at 6.6% in January. The rate could bolster EUR if markets begin to price in further ECB tightening.