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The GBP/EUR Exchange Rate Muted as all Eyes on BoE Rate Decision

Pound Sterling Currency Forecast

GBP/EUR stable as Markets await Conclusion of BoE’s Policy Meeting

The Pound Euro (GBP/EUR) exchange rate is trading in a narrow range this morning as markets await the Bank of England’s (BoE) rate decision later this afternoon.

At the time of writing GBP/EUR is holding close to its opening levels, with investors reluctant to make any moves ahead of the BoE’s rate decision.

Sterling’s (GBP) Steady as BoE Rate Decision Ahead

Movement in the Pound is muted this morning as markets await the BoE’s first rate decision of 2018.

With policymakers widely expected to vote to leave the bank’s monetary policy untouched this month, it will be the BoE’s outlook that is likely to prompt any movement in Sterling later today.

In the wake of the UK’s better than expected performance last year, there is certainly a chance for the BoE to think about implementing another rate hike this year, with some analysts suggest this could come as early as May.

Dennis de Jong, managing director at UFX.com said;

“The rise to 0.75% is expected to come at some point in the next few months, with many thinking that the UK economy is performing well enough to shoulder a rate hike in May.”

However with BoE Governor previously voicing his concerns over the impact of Brexit, the growing uncertainty over recent months could prompt the bank to strike a more dovish outlook, likely leading to losses for Sterling.

Euro (EUR) Stable as German Trade Rebalances

At the same time the Euro is holding steady this morning as Germany’s latest trade balance came in below expectations.

Data showed that Germany’s trade surplus narrowed from €23.7bn to €18.2b in December, sliding past expectations of a more modest tumble to €19.5bn and striking its lowest levels since April.

The reading also confirmed that Germany’s trade surplus shrank for first time since 2009 last year.

However with the fall being driven by increased consumption within Germany and not a fall in exports, the result will likely be welcomed by those in the Eurozone as it helps to rebalance Germany’s dominance.

GBP/EUR Forecast: UK Trade Deficit to Narrow?

Looking past the BoE rate decision later today the GBP/EUR exchange rate may strengthen tomorrow as economists forecast the UK’s own trade balance will show that Britain’s trade deficit narrowed in December.

However any potential gains could easily be undone with the accompanying release of the UK’s industrial production data, which is expected to reveal a sharp decline in factory output at the end of last year.

Meanwhile the Euro may be bolstered by the publications of France’s and Italy’s own production figures, if industrial output rises in both countries as forecast.