EUR/GBP Exchange Rate Edges Higher on Bank of England Rate Cut Fears
The Euro Pound (EUR/GBP) exchange rate rose by 0.3% this morning, with the pairing currently trading around £0.848 as UK markets remain jittery ahead of this afternoon’s Bank of England (BoE) interest rate decision.
The BoE’s decision is on a ‘knife-edge’ according to Neil Wilson, an analyst at Market.com, who also added:
‘Recent comments from several policy makers at the Bank, some softer inflation data and GDP numbers, and persistent risks to the global outlook suggest the MPC may choose to act now to cut.’
With just one day to go until the UK officially leaves the European Union, odds of a rate cut from the central bank have risen as Britain now faces an uncertain economic future.
However, the post-election economic bounce may dissuade policymakers from adjusting the current 0.75% interest rate, with many companies now unfreezing their investment plans for a post-Brexit economy.
Paul Hollingsworth, an Economist at BNP Paribas, commented:
‘We suspect a majority on the MPC will want to wait for more hard data, and to see the extent of any fiscal response in the March budget.’
If the BoE does hold its interest rates today, we could see the GBP/EUR exchange rate begin to rise as UK markets breathe a sigh of relief as the UK’s economic outlook stabilises.
EUR/GBP Exchange Rate Improves as German Unemployment Drops in January
The Euro (EUR) rose after Germany’s January unemployment change report beat forecasts and fell from 8,000 to -2,000, providing some relief for the Eurozone’s largest economy as 2020 gets underway.
Detlef Scheele, the head of Germany’s Labour Office, was upbeat in his analysis, saying:
‘The economic weakness continues to leave its mark on the job market. Overall, however, it was also robust at the beginning of the year.’
In other German economic news, today will see the release of January’s preliminary harmonized inflation figure, which is expected to rise from 1.5% to 1.7%.
As a result, we could see the EUR/GBP exchange rate retain some of today’s gains, with the German economy showing an encouraging development early in the year.
The Euro (EUR) is also benefiting from its safe-haven status today, with China’s coronavirus outbreak leaving markets in a notably risk-off mood.
EUR/GBP Outlook: Could Brexit Day Weaken the Pound?
Euro (EUR) investors will be looking ahead to tomorrow’s flash release of the Eurozone’s inflation figure for January, which is forecast to hold steady at 0.2% on quarter-to-quarter, while the year-on-year figure is expected to ease from 1.3% to 1.2%.
Tomorrow will also see the release of January’s UK GfK consumer confidence, which is expected to remain subdued at -9.
Brexit will remain firmly in focus tomorrow, with the UK due to officially leave the EU. Any further indications that the UK could fail to secure a comprehensive trade deal with the bloc, however, would weaken the Pound as the UK’s economic future looks uncertain.