Euro Pound Exchange Rate Rangebound amid Hawkish Stance from BoE Policymaker
At the time of writing, the EUR/GBP exchange rate is trading at around £0.8546, with minimal movement from today’s opening levels.
Pound (GBP) Mixed after BoE Policymaker Delivers Hawkish Speech
The Pound (GBP) is rangebound against the Euro (EUR) this afternoon after BoE policymaker Michael Saunders struck a hawkish tone in a speech earlier today.
Last week, Saunders was one of three Monetary Policy Committee members to vote for the bank to hike interest rates by 50-basis points.
Saunders has showed concern that UK inflation will exceed BoE’s forecasts of 10%. This is simultaneously improving interest rate hike bets somewhat and further highlighting the UK cost of living crisis.
‘I put considerable weight on risks that, unless checked by monetary policy, domestic capacity and inflation pressures would probably be greater and more persistent than the central forecast.
‘As a result, my preference has been to move relatively quickly to a more neutral monetary policy stance.
Furthermore, Sinn Fein’s victory in Northern Ireland’s elections have triggered fresh Brexit concerns.
In response, the UK Deputy Prime Minister, Dominic Raab, has stated that ‘whatever measures are necessary’ will be undertaken to ensure the Northern Ireland protocol is settled.
However, the UK government insists that all viable options will be considered, including scrapping certain elements of the deal altogether. If a deadlock occurs, it may cause friction between the UK and the EU and trade relations.
Euro (EUR) Subdued as Eurozone’s Investor Confidence Falls to 23-Month Low
The Euro (EUR) is trading flat against the Pound (GBP) today in response to a disappointing drop in Eurozone investor confidence.
For the third consecutive month, the Sentix index of investor confidence has fallen.
The index drop to its the lowest level since June 2020 this month, printing at -22, down from the previous reading of -18 and slipping more than the forecasts of -20.8.
Consequently, fears of a recession across the Eurozone have returned, exacerbated by Russia’s invasion of Ukraine.
Manfred Hubner, managing director of Sentix, commented:
‘The recession is becoming visible.
‘The traces of the Ukraine conflict are becoming increasingly visible in the economy. The sanctions against Russia are having an effect on enemies and friends alike.
Last month, the first mover economic index clearly pointed the way towards recession; at the beginning of May, the downturn deepened further.
‘In other words, it’s coming thick and fast.’
Euro Pound Forecast: Will German Economic Sentiment Weaken EUR Exchange Rates?
Looking ahead, the Euro Pound exchange rate may be under pressure from Germany’s latest ZEW economic sentiment index.
At present, markets predict the index will report another slump in German morale. Should this print true, it is likely to weaken EUR exchange rates.
Moreover, the single currency may be influenced on Wednesday by a speech from European Central Bank (ECB) President, Christine Lagarde.
If Lagarde strikes a broadly dovish tone, it may also undermine demand for the Euro.
On the other hand, GBP investors are looking toward the latest UK GDP release.
Economists are predicting Thursday’s figures will report UK GDP slowed to 1% in the first quarter of 2022, potentially placing more pressure on the Pound.