Pound euro (GBP/EUR) exchange rate muted following dovish BoE decision
Article updated 12:25, 09/05/2024:
The pound euro (GBP/EUR) exchange rate is remaining muted thus far, following the Bank of England’s (BoE) interest rate decision.
While the BoE kept rates unchanged as expected, the accompanying meeting report showed that the vote had become increasingly split. Two members of the Monetary Policy Committee voted for a cut, which could be a sign of an incoming rate cut.
Furthermore, the accompanying summary showed that the BoE had discussed whether its policy would remain restrictive in the wake of a cut.
The minutes read:
‘The Committee recognised that the stance of monetary policy could remain restrictive even if Bank Rate were to be reduced, given that it was starting from an already restrictive level.’
As such, the pound has edged lower against most peers, but remains flat against the euro, likely due to a mixed market mood.
At the time of writing, GBP/EUR is trading at around €1.1614, showing little movement from the morning’s opening rates.
Original article continues below:
Pound euro (GBP/EUR) exchange rate flat ahead of BoE interest rate decision
The pound euro (GBP/EUR) exchange rate is narrowing this morning, as markets anticipate the Bank of England’s (BoE) interest rate decision.
At the time of writing, GBP/EUR is trading at around €1.1627, showing little movement from the morning’s opening rates.
Pound (GBP) wavers ahead of BoE decision
The pound (GBP) is treading water this morning, as markets await the latest interest rate decision from the BoE.
While rates are expected to remain unchanged, the path ahead for the BoE remains up for debate. Investors are mulling the possibility of the central bank taking the next small steps towards a rate cut with today’s guidance.
Furthermore, the expectation has been floated of a more dovish vote split amongst the Monetary Policy Committee (MPC).
The vote was split eight to one at the last meeting, with the majority favouring unchanged interest rates. This could shift to a 7-2 split at this meeting, which may indicate a rate cut on the cards for the near future.
Euro (EUR) muted amid lack of data
The euro (EUR) is tepid this morning, as a lack of impactful data releases prevents it from finding its footing.
Additionally, markets are likely awaiting comments from European Central Bank (ECB) Vice president Luis de Guindos.
Guindos has been one of the more consistently dovish members of the ECB in recent times. In past speeches, he has indicated that the central bank will cut interest rates in June. If he reiterates this stance once again, the common currency may slide later today.
Elsewhere, a mixed market mood is likely applying further pressure on the euro this morning. Due to the common currency’s safer stature, the wavering tone may be flattening its appeal to investors.
Pound euro exchange rate forecast: UK GDP expansion to lift pound?
Looking beyond the BoE’s rate decision, the core catalyst of movement is likely to be the latest UK GDP data.
In the first quarter of 2024, the UK economy is forecast to have grown by 0.4% on a quarterly basis. As this would mark a clear recovery in the economy and suggest that the UK has exited a recession, Sterling could rally.
For the euro, investor focus may be on the latest European Central Bank monetary policy meeting accounts.
If the meetings reflect a dovish consensus amongst policymakers, the common currency could weaken against its peers.
Elsewhere, risk appetite is likely to play a role in shaping the pound euro exchange rate. As Sterling is a more risk-sensitive currency, a shift towards bullish trade could strengthen GBP above EUR.