Pound Euro (GBP/EUR) Exchange Rate Ticks Higher following Hawkish BoE Comments
The Pound Euro (GBP/EUR) exchange rate is firming this morning, following hawkish comments from Bank of England (BoE) policymakers.
At the time of writing, GBP/EUR is trading at around €1.1453, rising by roughly 0.2% from the morning’s opening rates.
Pound (GBP) Firms amid Hawkish BoE Testimony
The Pound (GBP) is firming this morning, following hawkish comments from Bank of England policymakers during a testimony.
Speaking to the UK Treasury committee, BoE Governor Andrew Bailey and other rate setters are discussing what work needs to be done to control inflation.
Amid criticism of muddled commentary, BoE Deputy Governor Dave Ramsden reiterated the bank’s concerns over sticky inflation. Furthermore, Ramsden pushed back against markets reacting too positively to recent falls in headline inflation.
He stated:
‘We are absolutely committed to getting inflation back to the 2% target. Those are the indicators of [service inflation] persistence that we are focusing on when setting Bank Rate at the current level. Markets are entitled to their view, but that doesn’t mean we are validating that view when we are comment on it.’
Additionally, news this morning that Government borrowing was £16.9 billion lower than the Office for Budget Responsibility (OBR) forecasts could be underpinning GBP.
This would, theoretically, give UK Chancellor Jeremy Hunt additional wiggle room for tax cuts. In turn, this could spark more growth opportunities for the UK economy which could lift investors spirits.
Euro (EUR) Edges Lower amid Risk-On Trade
The Euro (EUR) is ticking downward this morning, as a lack of data leaves the common currency exposed to improving risk appetite.
As a safer currency, EUR is struggling against more risk-sensitive peers, such as the Pound, this morning. However, this is offset by weakness in the US Dollar (USD), due to the pairing’s negative correlation.
Elsewhere, burgeoning European Central Bank (ECB) rate cut bets may be exerting pressure on EUR exchange rates.
Markets have priced in up to 33bps of cuts by June 2024, as inflation continues to cool. Furthermore, the Eurozone economy remains precarious, and slowing, bringing further expectation of easing monetary policy.
Pound Euro Exchange Rate Forecast: Autumn Statement in Focus
Looking ahead for the Pound, tomorrow’s Autumn Statement is the main event. Due in the early afternoon, Chancellor Hunt’s budget could strengthen to GBP if it builds confidence in the UK economic outlook.
However, if it proves disappointing to investors, Sterling may be sidelined against its peers as investors look elsewhere.
For the Euro, ECB President Christine Lagarde is due to speak this afternoon. If she strikes a hawkish tone, the common currency could strengthen amid renewed ECB rate hike bets.
Elsewhere, risk appetite is likely to play a role in directing GBP/EUR’s movement. If the market mood sours, the Euro could gain ground due to its safer stature.