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GBP/EUR Update: Pound Nosedives as BoE Suggests No More Rate Hikes for Now

While the Pound made notable gains against the Euro earlier this week, this has all fallen apart due to a negative reaction to Bank of England (BoE) news.

On the plus side, the BoE has finally raised UK interest rates for the first time in over a decade, increasing the prior 0.25% rate to 0.50%.

Unfortunately, BoE minutes and statements have suggested that there might not be any more interest rate hikes for the foreseeable future, due to immense uncertainty about the Brexit process.

This has sent the GBP/EUR exchange rate tumbling, down by -1.7% during Thursday afternoon.

The Pound opened daily trading against the Euro around 1.1401, but because of widespread trader disappointment has slumped to a lower 1.1198.

(Last updated November 2nd, 2017)

The Pound has fallen back slightly against the Euro today, dropping from an earlier exchange rate of 1.1427 to a lower 1.1403.

This deterioration comes on the eve of a major Bank of England (BoE) interest rate decision, which is set to cause Pound volatility whichever way it goes.

Economists remain split on whether the BoE will actually commit to a rate hike, but there have been additional questions of whether the economy is even strong enough to handle higher interest rates right now.

Giving their take on the situation have been Michael Ellington and Costas Milas of the University of Liverpool;

‘If the Monetary Policy Committee (MPC) vote to hike, subsequent hikes will be necessary in order to meet the inflation target over the medium term. This comes at the expense of depressing GDP growth further. Our view is to abstain until the uncertainty cloud of Brexit negotiations starts to clear’.

(First published November 1st, 2017)

The Pound has maintained its week-long rise against the Euro today, having recently reached the best exchange rate since mid-June.

  • GBP EUR rate rises to 1.1427 – EUR GBP trades down at 0.8749
  • Pound strengthened by manufacturing stats – Rate hike optimism still high
  • Euro declines on minimal Eurozone influence – Inflation stats still disappointing
  • D-Day approaches for UK interest rates – Euro could recover on German jobless data

There has been little news of note out of the Eurozone today, which has left the Euro to slide against the Pound.

Pound to Euro Boost caused by Higher Manufacturing Activity

The Pound has made a respectable advance against the Euro today, having been aided by higher reported manufacturing sector activity.

Forecasts had been for a slight slowdown in activity in October, so this rise was better-than-expected.

IHS Markit compiled the data; commenting on the result was IHS Director Rob Dobson;

‘UK manufacturing made an impressive start to the final quarter of 2017 as increased inflows of new work encouraged firms to ramp up production once again.

The sector looks to be achieving a quarterly rate of expansion close to 1%, therefore sustaining the solid pace of growth signalled by the official ONS estimate for the third quarter.

The continued robust health of manufacturing and rising price pressures will help cement expectations of the Bank of England (BoE) hiking interest rates for the first time in a decade as Thursday’s announcement approaches’.

This eagerly-anticipated interest rate decision has also supported the Pound today, as a number of economists believe the BoE will finally commit to a rate hike.

Euro sees Limited Movement on Minor Data Releases

While the Pound has been boosted by positive domestic data, the Euro has conversely lost ground because of limited and disappointing Eurozone data.

Irish and Greek manufacturing activity slowed in October, while the Netherlands has only seen a minimal increase over the same period.

Tuesday brought reports of higher Eurozone GDP and falling unemployment; less helpfully, inflation was reported to be falling.

While good news for consumers, this has also lessened the pressure on the European Central Bank (ECB) to commit to tightening monetary policy in the future.

BoE Interest Rate Decision – Will GBP/EUR Rally on UK Rate Hike?

The Pound has turbulence and a possible crash in store on Thursday, when the Bank of England (BoE) makes its long-awaited November interest rate hike.

Some economists are firmly of the opinion that an interest rate hike will take place, raising UK rates from 0.25% to 0.50%.

Such a move could cause a Pound surge, while a surprise rate freeze could send the GBP/EUR exchange rate crashing down on trader disappointment.

If the Pound does tumble on Thursday, the Euro could be well placed to rally against it. Eurozone data will cover German unemployment and overall manufacturing activity.

Forecasts are for a slight increase in manufacturing, along with a -10k drop in the number of unemployed persons.

Current Interbank GBP EUR Exchange Rates

At the time of writing, the Pound to Euro (GBP EUR) exchange rate was trading at 1.1427 and the Euro to Pound (EUR GBP) exchange rate was trading at 0.8749.