The Pound (GBP) has tumbled by -0.4% against the Euro (EUR) today, following May’s Bank of England (BoE) meeting.
As many had forecast, BoE policymakers left interest rates unchanged at 0.5%, but this still triggered a negative reaction among Pound traders.
BoE officials also downgraded their 2018 UK growth forecasts, from the 1.8% estimate from a few months ago to a lower 1.4% today.
GBP trader confidence has additionally been rattled by the growth forecasts for 2019-20 being cut from 1.8% to 1.7%.
(Last updated 10th May, 2018)
Tensions about Key BoE Vote Leave GBP/EUR Exchange Rate Static
An interest rate hike from 0.5% to 0.75% was almost guaranteed by forecasters in April, but sentiment has since shifted to predict another rate freeze.
There are still lingering hopes that BoE officials might raise interest rates today, which accounts for the present tight trading for the Pound.
In other news, annual levels of UK manufacturing and industrial output have been reported higher in March, but this has failed to spark a GBP/EUR advance.
Contrasting Production and Unemployment Rate Stats Leave EUR/GBP Exchange Rate Flat
Euro to Pound (EUR/GBP) movement today has been similarly uninspiring, with the single currency trading in a narrow range.
This limited movement has been caused by contrasting Eurozone data releases. On the positive side, Italian industrial production levels rose above forecasts in March.
Less supportively, the Greek unemployment rate rose from 20.6% to 20.8% in April, despite predictions for a static printing.
Pound to Euro (GBP/EUR) Exchange Rate Forecast: Will Sterling Fall Further on BoE Interest Rate Freeze?
The week’s main UK economic event will come at noon today, when Bank of England (BoE) policymakers will hold their high-impact monetary policy meeting.
The prevailing sentiment is for the bank to leave its interest rate untouched at 0.5%, given how negative April’s UK data releases were.
That said, a Pound to Euro (GBP/EUR) exchange rate rally could still occur today even if the BoE leaves interest rates at their current level.
If BoE officials upgrade their GDP growth forecasts and predict a UK economic recovery over 2018-19, the Pound could firm against the Euro.
Additionally, if there is a narrow division between voters for and against higher interest rates, such as a four-to-five split, then the Pound could also appreciate.
The National Institute for Economic and Social Research (NIESR) will also be releasing its GDP estimate for April this afternoon.
This is predicted to show an upgrade from 0.2% to 0.3%.
Such a rise could boost Pound exchange rates, potentially building on optimism generated by a positive forecast from BoE officials.
Can Euro to Pound Exchange Rate (EUR/GBP) Rise on ECB President’s Speech?
For Euro (EUR) traders, the next event that could cause movement against the Pound (GBP) will be a speech from European Central Bank (ECB) President Mario Draghi.
Mr Draghi will be speaking on Friday afternoon at a European University Institute (EUI) event in Florence and may touch on monetary policy.
Broadly speaking, if Mr Draghi has a positive outlook for the Eurozone during 2018 and beyond then the Euro could make a late-week rise against the Pound.