Pound Euro (GBP/EUR) Exchange Rate Slips as Investors Tune In to BoE Bailey Testimony
The Pound Euro (GBP/EUR) exchange rate is weakening this morning, as the Bank of England (BoE) Governor Andrew Bailey gives a testimony.
At the time of writing, GBP/EUR is trading at around €1.1361, a fall of around 0.2% from the morning’s opening rates.
Pound (GBP) Narrows as BoE Governor Bailey Testifies on SVB Collapse
The Pound (GBP) is trading in narrow boundaries this morning, as investors listen to Bank of England (BoE) Governor Andrew Bailey’s testimony.
Speaking to the UK Treasury committee, Bailey is testifying over the collapse of Silicon Valley Bank (SVB). Thus far, he has reiterated the strength of the UK’s banking sector which could be lending some support.
Sterling could be being underpinned by Bailey’s speech yesterday, wherein he appeared to leave room for further hikes. He stated:
‘We have to be very alert to any signs of persistent inflationary pressures and if they become evident, further monetary tightening would be required.’
Furthermore, an increase in UK food inflation could be reaffirming rate hike bets among UK investors. Inflation hit 15% in March, an 18 year high. But, concerns over the UK’s economic status and the cost-of-living crisis is preventing GBP from capitalising on these bets.
Euro (EUR) Muted amid Upbeat Trade
The Euro (EUR) is seeing muted trade this morning, as an upbeat market mood appears to weigh on the safer currency.
However, the common currency is likely remaining underpinned by hawkish comments from European Central Bank (ECB) policymaker Isabel Schnabel.
Yesterday, Schnabel stated that she wanted the ECB’s march statement to leave room for further tightening. On the back of this, investors priced in further tightening from the ECB.
Elsewhere, continued developments in the Ukraine Russia war may be affecting sentiment towards the common currency. Belarus’ foreign ministry is laying the blame for their hosting nuclear weapons at Nato’s feet.
Furthermore, a weakening US Dollar could be serving to add further cushioning to the single currency. The pair shares a negative correlation, meaning that a weaker ‘Greenback’ brings some cheer to EUR.
GBP/EUR Exchange Rate Forecast: German Consumer Confidence to Buoy EUR?
For the Euro, tomorrow brings the release of April’s GfK consumer confidence index for Germany. With pessimism forecast to decrease, the improving sentiment in the bloc’s largest economy could strengthen EUR.
This afternoon, European Central Bank President Christine Lagarde is scheduled to deliver a speech. If she takes a firm stance on curtailing inflation in the Eurozone, EUR could rise as rate hike bets increase.
European Central Bank policymaker Isabel Schnabel is scheduled to speak tomorrow evening. If she reasserts the ECB’s hawkish attitude, the Euro could rally.
Looking ahead for the Pound, the core catalyst of movement may come tomorrow evening. Bank of England (BoE) policymaker Catherine Mann is scheduled to speak in the evening.
If she strikes a hawkish note, Sterling could strengthen as investors increase their bets on further rate hikes. However, if she remains cautious GBP could weaken.