Home » Pound Euro exchange rate storms higher on robust UK PMIs

Pound Euro exchange rate storms higher on robust UK PMIs

The Pound Euro exchange rate jumped to a three-week high this week as GBP investors welcomed the publication of the UK’s latest PMI figures. 

Pound surges as strong PMIs bolster BoE rate hike bets 

The Pound Euro exchange rate got off to a slow start this week. Sterling was muted amid uncertainty over a deal to resolve the dispute over the Northern Ireland Protocol. While the Euro was subdued ahead of Russian President Vladimir Putin’s State of the Nation address.  The GBP/EUR exchange rate was then catapulted to a three-week high on Tuesday after the UK’s latest PMIs reported the vital service sector returned to growth for the first time in six months.  The surprisingly strong figures prompted speculation the peak of the Bank of England’s (BoE) current rate hike cycle could be higher than previously forecast and turbocharged GBP demand.  While the Eurozone’s PMIs also printed above forecast this failed to buoy EUR sentiment following a aggressive speech from Putin.  While it faced some profit taking, the Pound was able to cling to the bulk of its gains through the second half of the week. This was aided by some hawkish comments from BoE policymaker Catherine Mann Mann in which she suggested more tightening is needed and cautioned that a pivot from the BoE is not imminent.  Meanwhile a below forecast reading from Germany’s latest IFO business climate index, in addition to a disappointing German GDP release and the Euro’s negative correlation with the US Dollar, left EUR exchange rates to trade with limited support through the second half of the week. 

Cooling Eurozone inflation to drag on the Euro? 

The publication of the Eurozone’s flash CPI estimate is likely to dominate movement in the GBP/EUR exchange rate next week.  February’s preliminary release is expected to report another cooling of Eurozone inflation. This is likely to further weaken expectations for future interest rate hikes from the European Central Bank (ECB) and weigh on the Euro.  Meanwhile GBP investors may look to a speech from BoE Governor Andrew Bailey on Wednesday for fresh insight into the bank’s monetary policy plans.  If Bailey remains resolute on the need to bring inflation back within the BoE’s 2% target range and hints at taking further action to achieve this, the Pound could soar.  On contrast is he comes across as less hawkish than some of his colleagues Sterling could run into some headwinds.  If you’ve got a GBP/EUR currency transfer to arrange, the team at TorFX are on hand to help. Get started now to access bank-beating exchange rates and fast, free transfers.

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