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EUR GBP Exchange Rate Slides as Vlieghe Comments Drive Further Rate Hike Speculation

The Euro Pound (EUR GBP) exchange rate dipped again this morning following a speech by Bank of England policymaker Gertjan Vlieghe.

Pound (GBP) Jumps on BoE Comments

While Sterling already started on strong footing today following an unexpectedly hawkish meeting by the BoE’s Monetary Policy Committee (MPC) yesterday, it was driven even higher this morning following a speech by BoE member Gertjan Vlieghe.

Speculation of a November rate hike from the central bank wend wild this morning as the historically dovish policy member said in a speech that he believed that a rate hike would be necessary ‘as early as in the coming months’ in the wake of impressive employment figures and expectations that wage growth will soon begin to pick up.

Vlieghe said in his speech to economists in London today;

‘Until recently, I thought the appropriate response of monetary policy was to be patient, given modest growth and subdued underlying inflationary pressure. But the evolution of the data is increasingly suggesting that we are approaching the moment when bank rate may need to rise.’

Investors took the remarks as another signal that the MPC may vote to raise interest rates at their November meeting to coincide with the next inflation report.

However some analysts have suggested that the rate hike may just be a reversal of last year’s rate cut and that subsequent raises may still be some way off.

Euro (EUR) Weakened by Dip in Trade Balance

Meanwhile the Euro struggled to repel the Pound advance this morning as the latest Eurozone trade balance saw the bloc’s trade surplus shrink in July.

According to data published by the EU’s statistical office, Eurostat the Eurozone trade surplus slid from €26.6bn to €23.2bn at the start of the second quarter.

While this was still slightly higher than expected it was still not enough to offset the sharp rise in Sterling sentiment.

EUR GBP Forecast: Carney to Speak on Monday

Looking ahead the EUR GBP exchange rate may slide even further at the start of next week’s session following a speech by BoE Governor Mark Carney who is expected to further discuss the banks future monetary policy plans, with markets hoping for some clues about the possible rate hike in November.

Meanwhile the Euro is likely to see little gains at the start of next week despite expectations that the Eurozone’s final CPI reading for August will confirm that inflation jumped from 1.3% to 1.5% as markets remain doubtful that it will prompt the European Central Bank (ECB) to shift away from its current ultra-loose monetary policy.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.8819 and the GBP EUR exchange rate was trending around 1.1339.