GBP/EUR Exchange Rate Wavers amid Rate Hike Expectations
The Pound Euro (GBP/EUR) exchange rate is fluctuating as both central banks are expected to continue raising interest rates.
At time of writing the GBP/EUR exchange rate is around €1.1731, relatively unchanged from this morning’s levels.
Pound (GBP) Supported by Elevated Rate Hike Bets
The Pound (GBP) is finding mixed success against its rivals this morning amid a lack of economic data. But with a flurry of crucial releases this week, GBP investors remain buoyant on elevated rate hike expectations from the Bank of England (BoE).
Looking ahead to a busy week of data releases, GBP investors could be hedging their bets ahead of the latest inflation data on Wednesday. An expected modest cooling to 8.5% is unlikely to deter the BoE from its hiking path, even if the headline CPI was to cool further.
Turning to Thursday, and the latest monetary policy announcement from the central bank could have big implications for Sterling. A predicted 25bps rate hike is all but priced in, but attention will be on the post-meeting press conference and accompanying statement. If BoE Governor Andrew Bailey hints at further tightening, the Pound could rally.
Euro (EUR) Underpinned by Hawkish ECB
Meanwhile, the Euro (EUR) is remaining fairly supported on rate hike bets from the European Central Bank (ECB). With the central bank opting to raise the cash rate to 3.5%, signalling an 8th straight hike as it struggles to rein inflation down to the target rate of 2%.
This morning saw ECB policymaker Peter Kazimir appear bullish and flatly claim that the ECB will need to raise interest rates again in July, adding:
‘Upward inflation risks are still substantial, linked to the labour market, food prices, profit margins. Regarding Sept, I’m awaiting analysis of the cumulative impact of past ECB measures. Stopping rate hikes too soon “much more significant” risk than overtightening.’
Looking ahead, the Euro will be in for a turbulent time amid a number of speeches from high profile ECB policymakers throughout the week. Today will see ECB Chief Economist Philip Lane and Governing Council member Isabelle Schnabel talk. Any further hawkish comments on how the ECB intends to battle inflation, and the Euro could climb.
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