Euro Pound (EUR/GBP) Exchange Rate Trends Sideways ahead of BoE Meeting
The Euro Pound (EUR/GBP) exchange rate is trading in a narrow range today. Euro (EUR) profit-taking may be preventing the pairing from making any gains today.
On the other hand, a subdued Pound ahead of the Bank of England’s (BoE) interest rate decision may be limiting losses for EUR/GBP.
At time of writing the EUR/GBP exchange rate is at around £0.8847, virtually unchanged from this morning’s opening figures.
Pound (GBP) Muted ahead of BoE Decision
The Pound (GBP) is subdued today ahead of the Bank of England’s meeting. The prospect of a 25bps interest rate hike may be providing a slight boost to Sterling.
Markets are pricing in a 98% chance of the move from the BoE. Experts are anticipating that the central bank could signal a pause in policy tightening however, which may be capping gains for GBP today.
Antoine Bouvet, Benjamin Schroeder, and Padhraic Garvey at ING said:
‘The BoE is not focusing on any single inflation indicator, but is focused more on a broader definition of “inflation persistence” and price-setting behaviour where the data has been generally more encouraging over the past month or so. If that continues, our economist still suspects the committee will be comfortable with pausing the tightening cycle in May.’
Sterling may also be finding confidence from news that the ‘Windsor Framework’ passed through the House of Commons yesterday. The first vote on the post-Brexit Northern Ireland trade deal passed by 515 votes to 29.
Euro (EUR) Edges Lower amid Profit-Taking
The Euro (EUR) is slipping today. The single currency may be suffering from sustained profit-taking following the Federal Reserve’s interest rate decision. Additionally, a lack of significant data for the Eurozone is likely leaving EUR at the whim of a mixed market mood.
Nevertheless, signs of stability in the European banking sector may be underpinning EUR today. Markets have continued to react positively to the buyout of lender Credit Suisse by its rival UBS.
Speculation that the European Central Bank (ECB) will continue to hike interest rates despite market volatility could also be limiting the Euro’s losses today.
EUR/GBP Exchange Rate Forecast: Will ECB’s Lane Signal Further Rate Hikes?
Looking to the day ahead for the Euro, the latest consumer confidence figures for the Eurozone could push the single currency higher if they print as forecast. Whilst the index is set to remain in negative territory, the expected reading of -18.3 will be the highest since February 2022.
Also today, a speech from ECB Chief Economist Philip Lane could lend additional support to EUR if he signals further rate hikes from the central bank.
The March reading of Eurozone PMIs could see the Euro slip on Friday if the figures print as forecast. Output across all private sectors is set to tick lower.
For the Pound, the BoE’s interest rate decision later today will likely be a driver for the currency. The expected 25bps rate hike has largely been priced in by the markets already. Investors will instead be looking to the central bank’s forward guidance. Any signs of a pause in policy tightening or a rate hike cut could drag Sterling lower.
Friday’s retail sales figures could deepen any losses for GBP if they print as forecast. February’s sales growth is expected to cool to 0.2% which is still significantly below pre-pandemic levels.
A drop in private sector output could also weigh on Sterling in March’s PMIs print as expected.
