Pound Euro Exchange Rate Wavers as US Bank SVB Collapsed
(Updated, 09:30, 14/3/23)
The Pound Euro (GBP/EUR) exchange rate is fluctuating after the US-based Silicon Valley Bank (SVB) collapsed on Friday, sending shockwaves through the banking sector. However, with HSBC intervening to purchase SVB, thus avoiding a potential disastrous fallout in the UK tech sector , the Pound held steady. European Central Bank (ECB) policymaker Yannis Stournaras reassured the market that the collapse would not impact Eurozone banks.
At time of writing the GBP/EUR exchange rate is trading around €1.1363, relatively unchanged from this morning’s opening levels.
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GBP/EUR Exchange Rate Fluctuates on UK Rescue of Collapsed US Bank
The Pound Euro (GBP/EUR) exchange rate is trading narrowly as HSBC quells fears of a UK tech collapse with buyout of Silicon Valley Bank’s UK arm.
Pound (GBP) Supported by Tech Company Bailout
The Pound is failing to find a clear direction this morning amid a lack of data. However, the government’s last-minute intervention in securing a deal for HSBC to buy SVB UK could be limiting losses for Stirling.
With the US-based bank collapsing on Friday, fears of hundreds of UK tech companies going under sparked a rescue operation from HSBC and the UK government. The takeover, only costing £1, was signed off by the government, saving the finances of more than 3500 UK customers. Chancellor Jeremy Hunt said on Twitter:
‘This morning, the government and the Bank of England facilitated a private sale of Silicon Valley Bank UK to HSBC. Deposits will be protected, with no taxpayer support. I said yesterday that we would look after our tech sector, and we have worked urgently to deliver that promise.’
Euro (EUR) Propped Up by Reduced Fed Rate Hike Bets
Meanwhile, the Euro is also struggling for increased demand to open the week. A lack of major economic data left the Euro to trade on market sentiment. With the European Central Bank (ECB) interest rate decision coming up on Thursday, investors remain quiet.
The negative correlation the Euro shares with the US Dollar could see the former strengthen on a weakening ‘Greenback’. In light of the SVB collapse, Fed rate hike bets have been severely pared. Goldman Sachs are now expecting a pause at the next meeting, they said:
‘in light of recent stress in the banking system, we no longer expect the FOMC to deliver a rate hike at its March 22 meeting with considerable uncertainty about the path beyond March.’
Pound Euro Forecast: UK Employment Data to Dent the Pound?
Looking ahead, the Pound Euro exchange rate could see movement with the release of the latest labour market data from the UK. With expectations of the labour market finally loosening, rate hike expectations could wane. Unemployment is expected to tick higher to 3.8%, but moderate wage growth could keep investors confident of further increases in the interest rates.
Meanwhile, the Euro will remain trading on market sentiment amid a lack of data. Ongoing headlines in Ukraine will continue to impact the single currency. The negative correlation the Euro shares with the US Dollar could also continue influence the pairing.