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55% Chance of BoE Rate Cut Leaves Euro Pound (EUR/GBP) Exchange Rate Flat

Euro Pound Sterling (EUR/GBP) Exchange Rate Muted as BoE Meeting in Focus

The Euro Pound Sterling (EUR/GBP) exchange rate remained flat at the start of the week, leaving the pairing trading at around £0.8417.

Sterling remained under pressure as the Bank of England (BoE) is closer than any time in the last three years to slashing interest rates.

The bank’s monetary policy meeting on Thursday will likely be the main driver for movement of the Pound over the course of the week.

Despite Friday’s strong PMI data release, the bank still seems likely to cut interest rates this week with markets predicting a 55% chance.

While this is down from a 70% chance of a rate cut a week ago, the chance of a cut this week still weighed on GBP.

Euro (EUR) Under Pressure as German Business Morale Weakens

This morning’s data suggests the bloc’s largest economy got off to a slow start in 2020 after narrowly avoiding a recession in 2019.

The single currency remained flat against GBP after Germany’s Ifo Business Climate Index came in at a lower-than-expected 95.9.

Added to this, this was weaker than December’s reading of 96.3.

The unexpected weakening of German business morale at the start of the year weighed on Euro sentiment, leaving EUR/GBP flat.

In a statement following the release of this morning’s data, Ifo President, Clemens Fuest noted:

‘The German economy is starting the year in a cautious mood.’

Euro Pound Outlook: BoE Monetary Policy Meeting in Focus

Looking ahead to Tuesday, a lack of notable economic data could leave the Pound (GBP) under pressure against the Euro (EUR) as investors focus on the upcoming central bank meeting.

If the Bank of England (BoE) still appears close to cutting rates, Sterling is likely to slide.

Meanwhile, on Wednesday investors are likely to be looking to February’s GfK consumer confidence data.

If data shows that confidence in the bloc’s largest economy has improved, the Euro Pound (EUR/GBP) exchange rate will likely rise.