Home » GBP » GBP to EUR » GBP/EUR Exchange Rate Forecast: Is Unlimited QE an Option for the BoE?

GBP/EUR Exchange Rate Forecast: Is Unlimited QE an Option for the BoE?

Bank of England

GBP/EUR Exchange Rate Extends Rally 

The Pound to Euro (GBP/EUR) exchange rate is on the advance again this morning as the buying interest surrounding Sterling continues amid an improvement in market sentiment.  

At the time of writing the GBP/EUR exchange rate is trading at around €1,0932, virtually unchanged from this morning’s opening rate. 

How Might More BoE Stimulus Impact the Pound (GBP)? 

The Pound (GBP) is back on the rise, with the UK currency extending its rally from multi-year lows struck last week. 

But, there may be some headwinds approaching Sterling in the latter half of the week as the Bank of England (BoE) concludes its latest policy meeting. 

Having already slashed interest rates to a record low following two emergency rate cuts earlier in the month in an effort to limit the impact of the coronavirus crisis on the UK economy, the BoE is not seen to alter policy again this week. 

However, the fact the BoE has not cancelled its scheduled meeting this month may be telling that the bank still has some more action to take. 

This is likely to take the form of additional quantitative easing measures. 

The BoE’s current QE programme stands at £645bn after being expanded by a further £200bn following last week’s emergency meeting. 

Since then the UK government has announced a total lockdown as well as unveiled a massive new stimulus package to cover up to 80% of wages in the private sector. 

In light of this the BoE may look to aid the government’s stimulus efforts by committing to purchase even more bonds, with an expansion of QE to £800bn potentially supporting Sterling sentiment as it provides the government with more fiscal power to tackle the coronavirus crisis. 

There is also the outside chance that the BoE could follow the lead of the Federal Reserve in announcing it will do ‘whatever it takes, although an open-ended QE programme seems unlikely and could weigh on the Pound. 

Euro (EUR) Poised to Rally if Eurozone Coronavirus Cases Show Signs of Slowing 

Meanwhile, the Euro (EUR) is mostly muted this morning as the Eurozone remains in the midst of a major coronavirus outbreak. 

However, there are signs that the situation may be improving, with a falling number of new coronavirus cases being reported in Italy -the epicentre of Europe’s outbreak- helping to stoke market optimism. 

While there still looks to be a long way to go before the country can begin lifting its quarantine measures, the fact EUR investors can see a light at the end of the tunnel could help to provide some support for the Euro in the coming days.