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GBP/EUR Exchange Rate Jumps as BoE’s Bailey Downplays Possibility of Negative Interest Rates

Bank of England

GBP/EUR Exchange Rate Jumps on Bailey’s Rate Comments 

The Pound to Euro (GBP/EUR) exchange rate is surging higher this morning following comments from the Bank of England’s (BoE) Andrew Bailey regarding negative interest rates. 

At the time of writing, the GBP/EUR exchange rate is trading at around €1.1184, up roughly 0.5% from this morning’s opening rate. 

Pound (GBP) Cheered as Bailey Curbs Negative Rate Speculation 

The Pound (GBP) is enjoying some notable support this morning, surging against the Euro (EUR) and the majority of its other peers, following comments from Bank of England (BoE) Governor Andrew Bailey. 

In an online speech to the Scottish Chambers of Commerce, Bailey appeared to pour cold water on speculation that the BoE could deploy negative interest rates in order to support the UK economy through the latest lockdown. 

Bailey said: 

‘There are a lot of issues with negative rates. No country has used negative rates in ‘retail’ end of the financial market.’ 

While Bailey also warned that the UK economy is currently in a ‘very difficult period’ he suggested that the economic impact of the latest lockdown looks to be less severe than in Spring 2020. 

‘Our best guess is GDP over Q4 was flat to slightly down. We have very little evidence of the scale of the economic impact of latest lockdown. 

‘Mobility indicators are down more than in autumn, but less than in spring.’ 

In addition to this the Pound also looks to be buoyed by the UK’s latest coronavirus statistics, which may indicate that the spread of the coronavirus has peaked following a week in lockdown. 

Euro (EUR) Subdued Over Vaccine Concerns 

At the same time, the Euro (EUR) is struggling for direction this morning as EUR investors increasingly express their concerns over the slow pace of coronavirus vaccine rollouts in the EU. 

Europe is currently lagging well behind countries such as Israel and the UK with its vaccine rollout, in part due to the lengthier approval time for vaccines, as well as struggles in procurement. 

Critics have suggested the EU was too slow in placing its initial orders for vaccines as well as spreading its bets too thin, having order six different vaccines, only two of which have been granted approval. 

The slow pace of rollout is worrying for EUR investors as it suggests much of the Europe’s economy could remain paralyzed this year until most vulnerable are vaccinated.