GBP/EUR Exchange Rate Rangebound Ahead of This Week’s BoE Interest Rate Decision
The Pound Euro (GBP/EUR) exchange rate held steady today as Sterling traders await Thursday’s interest rate decision from the Bank of England (BoE). At the time of writing, the pairing is fluctuating around €1.17.
In the absence of notable UK economic data today attention has turned towards Thursday, when the BoE is expected to hold interest rates at 0.1%.
But with daily coronavirus cases falling across the UK, GBP investors are cautiously optimistic about a more hawkish monetary policy statement.
Philip Inman, The Guardian’s economics editor, commented on a recent Citi/YouGov poll about public expectations for soaring UK inflation, saying:
‘[Citi added] that the BoE could draw some comfort from a steadying in the public’s longer-run inflation expectations, though it would need to be watchful that the temporary increase in headline inflation later in 2021 did not push long-term price expectations higher.’
Analysts at Citi said:
‘A marked increase here could yet force the Bank to tighten policy even if the recovery is incomplete.’
GBP traders will also monitor the UK’s coronavirus situation this week. Any indications that daily cases are falling today would drive-up the GBP/EUR exchange rate.
Euro (EUR) Exchange Rate Steady Following Strong Eurozone Factory Data
The Euro (EUR) firmed this week but has failed to make any significant gains against the Pound.
German retail sales smashed expectations while the Eurozone’s latest manufacturing PMI was revised higher, boosting confidence in the bloc’s economic recovery.
Chris Wiliamson, the chief business economist at IHS Markit, who compile the PMI data, commented:
‘The fact that growth of Eurozone manufacturing cooled slightly in July after a record-breaking expansion during the second quarter should not itself be a major cause for concern. But the July survey also brought further signs that manufacturers and their suppliers are struggling to raise production fast enough to meet demand, driving prices ever higher.’
In the absence of Eurozone economic data today, however, EUR investors are instead becoming more concerned about the spread of the Delta coronavirus throughout Europe.
This could jeopardise the bloc’s economic recovery should rising infections or hospitalisations prompt further lockdown measures.
GBP/EUR Exchange Rate Forecast: German Retail Sales and Eurozone PMI Data in Focus
Euro (EUR) traders will eye tomorrow’s release of June’s Eurozone retail sales data for June. Could an uptick for the retail sector drive-up the EUR/GBP exchange rate?
Tomorrow will also see the publication of the Eurozone’s PMI composite figure for July. If this beats forecasts and shows growth in the bloc’s economy last month, then the single currency would head higher.
If Covid-19 cases fall in the UK this week, the Pound Euro exchange rate would benefit.
But GBP investors will instead closely monitor the BoE’s interest rate decision and monetary policy statement on Thursday.
Could we see the GBP/EUR exchange rate head higher on a hawkish monetary policy statement and economic forecast from the UK’s central bank?