Pound Euro (GBP/EUR) exchange rate flat ahead of BoE update
The Pound Euro (GBP/EUR) exchange rate is trapped in a narrow range this morning as markets brace for the Bank of England’s (BoE) latest interest rate decision this afternoon.
At the time of writing, GBP/EUR is trading at around €1.1705, showing little movement from the morning’s opening levels.
Pound (GBP) drifts lower ahead of BoE interest rate decision
Although it is holding steady against the Euro, the Pound (GBP) is on the defensive against the majority if its other peers this morning ahead of the BoE’s interest rate decision this afternoon.
As the central bank is widely expected to leave interest rates on hold, GBP investors will be focuses on the bank’s accompanying forward guidance.
Following a larger-than-expected cooling of UK inflation last month, GBP investors will look out for any signs that the central bank might be open to loosening its monetary policy earlier than expected.
Susannah Streeter, Head of Money and Markets at Hargreaves Lansdown, predicts:
‘Bank of England policymakers are highly unlikely to waver from their stance and are likely to continue to stress that vigilance is still needed while they spy the prospect for rate cuts on the horizon. However, there may well be more dissenters around the table, arguing for earlier cuts, given the super-stagnant nature of the economy and the worry that inflation may end up undershooting the target not just briefly but for a more sustained period.’
However, should policymakers push back against speculation of an upcoming interest rate cut, Sterling could be buoyed.
Euro (EUR) fluctuates following PMIs
The Euro (EUR) is facing headwinds this morning as mixed PMI data coupled with an upbeat market mood is serving to undermine the common currency.
March’s preliminary data showed that the Eurozone’s manufacturing activity decreased more than forecast, with the index falling to 45.7 rather than rising to 47 as expected
However, the services sector grew more than expected, with the index printing at 51.1 rather than a more modest expectation of 50.5.
In addition to the mixed data, the Euro is also struggling amid risk-on flows.
Pound Euro exchange rate forecast: BoE decision to infuse volatility in the Pound?
Looking ahead, the primary driver of movement for the Pound Euro exchange rate today will be the BoE’s upcoming interest rate decision.
Following on from that, Friday will see the release of the latest UK retail sales. In the month of February, retail sales are forecast to have slumped, from 3.4% to -0.3%
Should the data confirm a slowdown in the UK’s retail sector, the Pound could end the week on the back foot.
Turning to the Euro, Germany’s latest IFO business climate indicator is expected to have ticked up in March, up from 85.5 in February to 86 for this month’s reading.
Although the data is forecast to confirm a slight increase, the reading is still expected to hover around a three-and-a-half-year low. This may dent EUR exchange rates despite a modestly improved outlook for the Eurozone’s largest economy.