Home » Pound Euro exchange rate rocked by BoE rate decision

Pound Euro exchange rate rocked by BoE rate decision

The Pound Euro exchange rate was infused with notable volatility this week as the Bank of England (BoE) delivered its first interest rate decision of 2024. 

Pound fluctuates amid mixed messages from the BoE 

The Pound Euro exchange rate got off to a positive start this week, with the pairing striking a new five-month high. 

This came in response to some dovish comments from following comments from European Central Bank (ECB) policymaker Mario Centeno, who suggested the bank ‘should start cutting rates sooner rather than later’. 

The upside in GBP/EUR was then quickly reversed in the wake of the Eurozone’s latest GDP figures, as they showed the bloc managed to avoid a recession in the second half of 2023.  

At the same time, Sterling was undermined by a statement from the International Monetary Fund (IMF) warning the UK against further tax cuts, which dampened hopes for growth-boosting cuts in the UK’s upcoming Spring Budget. 

After rebounding in mid-week trade, trade in the GBP/EUR exchange rate then began even more erratic through the second half of the week. 

This was primarily driven by the BoE as it concluded its first policy meeting of the year with some mixed comments. While it pushed back against speculation of an imminent interest rate cut, it also signalled its next move will be lower. 

Meanwhile, the Euro fluctuated in response to the Eurozone’s latest consumer price index, after January’s preliminary CPI figures reported inflation slowed. 

Upbeat German industrial data to lift the Euro? 

Turning to next week, Germany’s latest industrial data may act as the main catalyst of movement for the Pound Euro exchange rate. 

This could see the Euro firm through the first half of the week if German factory orders and industrial production are shown to have risen in December. 

Also of note to EUR investors will be the Eurozone’s latest retail sales figures. Will another contraction in sales growth at the end of 2023 limit the Euro’s upside potential. 

Meanwhile, in the absence of any notable UK economic data, movement in the Pound may be tied to market risk dynamics. Could a cautious market mood infuse further volatility into Sterling? 

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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