Pound euro (GBP/EUR) exchange rate ticks down following BoE rate cut
The pound euro (GBP/EUR) exchange rate is trending lower this morning hot on the heels of the Bank of England’s (BoE) interest rate cut.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1776, down approximately 0.2% from this morning’s opening rate.
Pound (GBP) pressured by rate cut headwinds
The pound (GBP) continues to face pressure this morning in the wake of the BoE’s decision to lower interest rates yesterday afternoon.
The bank delivered its first interest rate cut since March 2020, as a quarter-point rate reduction saw the bank’s base rate retreat from a sixteen-year high of 5.25%, to its current level of 5%.
While the BoE’s accompanying guidance was somewhat hawkish, with only five of the nine voting policymakers favouring a rate reduction, Sterling’s losses appear limited, following a sharp decline in GBP exchange rates yesterday.
Meanwhile, a cautious market sentiment applies further pressure to the increasingly risk-sensitive currency this morning, leaving GBP largely on the back foot.
Euro (EUR) mixed amid data lull
The euro (EUR) is trading without a clear direction this morning amid a lack of fresh Eurozone data.
In the absence of macroeconomic releases, European Central Bank (ECB) interest rate bets prevent EUR from climbing higher.
Speaking to analysts at Bloomberg, ECB policymaker Yannis Stournaras, speculated over whether the Federal Reserve is likely to mirror the ECB’s dovish pivot towards the end of the third quarter.
As one of the more dovish voices within the ECB, Stournaras also highlighted the bloc’s worse-than-forecast growth so far this year, stating:
‘The renewed signs of weak economic activity and the high level of uncertainty will very likely dampen inflation more than had been expected.’
Elsewhere, EUR was able to recoup some of its recent losses overnight, due to its correlation with a weakening US dollar (USD).
Pound euro exchange rate forecast: PMIs in focus
Looking ahead, a lack of high-impact releases in both the Eurozone and the UK could see finalised PMIs pulled into focus on Monday.
In the UK, the finalised services PMI is forecast to print at 52.4 in July, rising from a previous 52.1 Signs of accelerating activity in the UK’s vital sector could lend GBP modest support, lifting it from recent lows.
Similarly, the Eurozone’s finalised services PMI is due for release, and is set to come in at 51.9 in July, softening slightly from the previous month’s 52.8. Should the data print as forecast, indicating a marginal slowing of services activity across the Euro bloc, EUR could stumble.
Elsewhere, global risk dynamics may influence movement in the currency pairing, with any bullish trade likely to lift the increasingly risk-sensitive pound against its safer rivals. Alternatively, a spell of gloomy trade could underpin the safe-haven euro.
In the meantime, market-moving US data is due for release this afternoon, with any downward shocks likely to imbue markets with additional volatility.