Euro Pound (EUR/GBP) Exchange Rate Forecast Trades Narrowly as Investors Await BoE Rate Hike
The Euro Pound (EUR/GBP) exchange rate is trading within a narrow range ahead of the Bank of England’s (BoE) interest rate decision later today.
An uptick to German bond yields could also be limiting gains for the pair. Continued Eurozone recession fears may prevent drastic losses, however.
At time of writing the GBP/EUR exchange rate is at around €, virtually unchanged from this morning’s opening figures.
Pound (GBP) Subdued as Investors ahead of BoE Interest Rate Decision
Ahead of the Bank of England’s interest rate hike, the Pound (GBP) is seeing subdued movement. Expectations of a 0.5% rate hike from the central bank may be helping Sterling to tick higher, however.
Hawkish signals from BoE Governor Andrew Bailey have seen markets increasingly price in the 0.5% interest rate hike. Speaking in weeks prior, Bailey hinted that a 0.5% hike was ‘on the table’ and that there would be ‘no ifs or buts’ when it came to bringing inflation back down.
If the central bank raises rates as forecast then it would represent e the BoE’s most drastic hike since 1997.
Sterling’s gains today could be limited amid a fall to activity in the UK’s construction sector. The sector reported its biggest fall in more than two years in July. The PMI fell above forecasts to 48.9.
Euro (EUR) Trends Higher amid German Bond Yield Recovery
The Euro (EUR) is firming against its rivals today despite fears of an imminent Eurozone recession. A recovery to German bond yields may be helping to support the single currency, as well as a pullback in the US Dollar (USD).
A below-forecast fall to German industrial orders may also be propping up the Euro today. German factory orders fell by -0.4% versus forecasts of -0.8%.
News that Italy is set to approve a significant aid package for businesses and households could lend further support to the single currency today.
The aid worth around €14.3B will go towards limiting the impact of soaring consumer and business costs.
Expectations that the Eurozone economy’s performance is set to worsen may be capping gains for the Euro today, however. The European Central Bank’s (ECB) consumer expectations survey indicated that households were losing faith in the ECB’s ability to curb soaring inflation.
Additionally, the ECB’s poll indicated that consumers expect prices to grow by 5% over the coming year.
EUR/GBP Exchange Rate Forecast: Will BoE Hike Rates as Predicted?
With no other significant data for the Euro this week, the single currency is likely to see its movements dictated by Eurozone recession fears. Any further cuts to Europe’s energy supplies could also dent confidence in EUR.
For the Pound, the Bank of England’s interest rate decision later today is likely to cause movement in the currency. The impact of the decision could be marginal however, as markets have largely priced in the predicted 0.5% rate hike.
If the BoE surprises investors with a more cautious 0.25% hike however, then it could push Sterling lower. Additionally, any notable comments in the MPC’s meeting minutes could prompt additional movement in GBP.