Pound Euro (GBP/EUR) Exchange Rate Edges Higher amid Fall in EU Consumer Confidence
(Article updated 16:40, 23/3/23) The Pound Euro (GBP/EUR) exchange rate is fluctuating this afternoon, following the release of the latest EU consumer confidence index.
This index showed that consumer pessimism had increased in March, but also reflected little change in consumer attitudes. Because of this, it seemed that the attitude held by consumers remained downbeat, which weighed on the single currency somewhat.
However, the potential for a future rate hike pause from the Bank of England (BoE) is keeping Sterling downbeat during the afternoon’s session.
At the time of writing, GBP/EUR is trading around €1.1315, showing little movement from the morning’s opening rates.
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Pound Euro (GBP/EUR) Exchange Rate Narrows as BoE Takes Data-Driven Stance
(Article updated 13:25, 23/3/23) The Pound Euro (GBP/EUR) exchange rate is narrowing this afternoon, as investors begin to explore the possibility of a rate hike pause.
After the Bank of England (BoE)’s 25bps hike this afternoon, investors are scouring the accompanying forward guidance for clues. The minutes released appeared to point to a firm shift in favour of data-driven forward guidance.
Because of this, some economists are exploring the prospect of this being the final hike for now, leaving Sterling lacking support.
James Smith and Antoine Bouvet, Economists at ING, commented:
‘Officials are less beholden to month-to-month swings in the data than perhaps the Federal Reserve/European Central Bank and are trying to take a more top-level look at pricing-setting behaviour. It’s this that will determine whether the Bank hikes again in May – and for now we think it won’t.’
Because of this perception, it appears that bets on future hikes are being pared back, preventing GBP from rallying.
At the time of writing, GBP/EUR is trading at around €1.1297, showing little movement from the morning’s opening rates.
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Pound Euro (GBP/EUR) Exchange Rate Firms ahead of BoE Interest Rate Decision
The Pound Euro exchange rate is edging higher this morning, as investors await the Bank of England’s interest rate decision.
At the time of writing, GBP/EUR is trading around €1.1317, ticking up by around 0.2% from the morning’s opening rates.
Pound (GBP) Edges Higher ahead of BoE Rate Hike
The Pound (GBP) is gaining modest ground this morning, as investors being to shore up the chances of a 25bps hike from the Bank of England (BoE).
While the hike is expected, the path forward for the BoE remains unclear. While repeated assertions have been made over the UK’s banking sector’s stability, further tightening could begin to unwind that.
The BoE is in a very precarious position, as tightening begins to take effect. Oliver Blackbourn, Portfolio Manager at Janus Henderson Investors, explains:
‘The Bank needs to tread a very narrow path as increased borrowing costs really start to bite but inflation remains well above the 2% target rate.’
Because of this, the room for further tightening appears to be narrowing. With the BoE needing to balance economic harm with curtailing sky-high inflation, investors will be mindful of any forward guidance.
Euro (EUR) Trims Post-Fed Gains
The Euro (EUR) is seeing largely muted trade this morning, lacking a clear direction against most peers. This may be due to profit taking, following yesterday’s impressive gains.
Amid a lack of impactful data releases, investors are likely readjusting the price of the common currency. Following last night’s rate hike from the Federal Reserve, EUR began to climb as the US central bank appeared to take a dovish angle.
However, a mixed market mood could be serving to mute potential gains, due to its nature as a safer investment. With the shocks from Credit Suisse appearing to have been absorbed, investors may feel more upbeat, favouring riskier currencies.
Underpinning the Euro is likely persistent rate hike bets from the European Central Bank (ECB). With the bank remaining hawkish in their attitudes towards inflation, investors are continuing to expect further rate rises.
Pound Euro (GBP/EUR) Exchange Rate Forecast: UK Retail Sales to Dent GBP?
Looking ahead for the Pound, beyond market reaction to the BoE’s interest rate decision, tomorrow’s retail sales data could provide direction.
While expected to remain at an increase, retail sales are forecast to have cooled in February. Due to the UK’s reliance on retail sales in times of economic strife, this could weigh on Sterling.
After this, the latest private sector indexes for March’s activity are due to print. With the service sector forecast to tick downward, but remain in growth, GBP could strengthen. However, further contractions manufacturing activity could temper these gains.
For the Euro, the picture is similar. PMIs for Germany and the Eurozone’s private sectors are due to print, reflecting March’s activity.
With Germany and the bloc’s service indexes forecast to show further growth, the single currency could make gains. However, with manufacturing forecast to remain in contractionary territory, this strength could be undermined.