Home » Pound euro exchange rate fluctuates following BoE rate decision

Pound euro exchange rate fluctuates following BoE rate decision

Trade in the pound euro exchange rate was uneven this week on the back of some mixed UK data and the Bank of England’s (BoE) latest interest rate decision. 

Pound knocked by ‘finely balanced’ rate decision 

The pound euro exchange rate got off to a slow start this week. Sterling ran afoul of a negative shift in risk appetite, while the single currency was supported by comments from European Central Bank (ECB) Chief Economist Philip Lane. 

GBP/EUR remained subdued through the first half of the week as slowing grocery price growth weakened inflation expectations in the UK. At the same time, a below forecast rise in German economic sentiment acted as a headwind for the euro. 

The pound then fluctuated in the middle of the week, following the release of the UK’s latest consumer price index.  

The CPI figures showed that inflation returned to the BoE’s target in May. Signs of sticky services inflation initially buoyed Sterling, before rising bets for an August interest rate cut from the BoE swiftly reversed these gains. 

Sterling then faced pressure on Thursday in the wake of the BoE’s latest policy meeting. While the BoE kept rates on hold, it suggested the decision was ‘finely balanced’, bolstering bets for an August rate cut. 

GBP/EUR then rebounded at the end of the week, with the euro facing resistance in response to weaker-than-expected Eurozone PMIs, while GBP exchange rates were underpinned after the latest UK retail sales figures smashed expectations. 

Political uncertainty to infuse volatility in GBP/EUR? 

Looking ahead to next week, the only data of note will be the publication of Germany’s latest business climate index. This could buoy the euro at the start of the session if business sentiment improved this month. 

Through the remainder of the week, we are likely to see political jitters drive movement in the GBP/EUR exchange rate. 

The euro is likely to be particularly vulnerable to this as the people of France go to the polls next week to determine who controls parliament. 

Will fears of a divided government drag on the single currency in the lead up to the first round on Sunday 30 June? 

Meanwhile, in the absence of any notable UK economic data, the focus for GBP investors may turn to the last full week of campaigning in the UK election. 

So far a widely expected Labour victory has limited volatility in the pound, but could any last minute surprises spark some turbulent?  

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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