Bank of England Rates Risk Drives Euro

Will the Pound to Euro Rate fall Into the 1.10’s soon?

The euro to pound rates are rising rapidly this week as sterling continues to react to concerns about the Bank of England lowering exchange rates during their meeting on Thursday. Any statistics that could have helped the euro over the last few week weeks seem to have stunted it, with disappointing numbers coming out of Germany, and mediocre results coming out of France. Meanwhile, the pound is one of the most worst performing currencies of the last day due to the interest rates fears.

Euro and Pound Go Head to Head

There is a 50% chance the Bank of England will cut rates, according to the markets. The British pound has gone up and down as a result, and the volatility is benefitting the euro. The outcome will be tight, and the result will impact currencies regardless.

If sterling continues to weaken over the next 24 hours, this might suggest that the market has decided to price in a cut in interest rates, with investors actively removing their money from the table. This will benefit the euro, but, if the Bank of England decides to leave rates unchanged, we could see sterling strengthen. This could leave the euro in a weak position if there is little good news to come out of the rest of the week.

At the moment, economic conditions in the UK seem stable, with positive numbers coming out of the country over the last few weeks, including an increase in business confidence and productivity in the manufacturing and services sectors improving. Depending on the progress of Brexit negotiations and economic performance overall for 2020, interest rates could drop further in the year.

US Economy Meeting Forecasts

Over in the US, interest rates are also a topic of discussion. Markets are hedging their bets on whether the Federal Reserve will cut interest rates at some point this year. However, they have said that there would have to be a serious change on its outlook for GDP growth in the US, target inflation and full employment for this to happen. Up to now, the economy is as forecast by the Fed across the board.

For more GBP/EUR news or if you have a currency requirement you can get in touch with me, Tom Holian, directly at teh@currencies.co.uk, or call +44 (0) 1494 360 899 to discuss these factors in more detail.