Pound to Euro News, Forecast: Crucial GBP/EUR Support 1.1765

August 1, 2024 - Written by John Cameron

STORY LINK Pound to Euro News, Forecast: Crucial GBP/EUR Support 1.1765

The British Pound edged lower on Wednesday ahead of the latest Bank of England (BoE) policy decision with the latest inflation data also underpinning the Euro.

The Pound to Euro (GBP/EUR) exchange rate retreated to just below 1.1840, but holding above 2-week lows around 1.1820.

A majority of investment banks expect the BoE to cut rates, but there is a high degree of uncertainty, and markets are only pricing in around a 60% chance.

ING’s base case is for a 6-3 vote for a 25 basis-point cut to 5.25%

It added; “The forthcoming BoE meeting and our call for the start of the easing cycle should therefore present a headwind to the resurgent pound.”

The bank expects GBP/EUR to dip below the key support area around 1.1765.

The headline Euro-Zone inflation rate edged higher to 2.6% for July compared with consensus forecasts of an unchanged rate of 2.5%.

The core rate held at 2.9% compared with market expectations of a slight reduction to 2.8%.

The slightly higher than expected inflation data maintained concerns over the risk of stubborn inflation, although there were still market expectations of a further ECB policy rate cut in September.

HSBC economist Fabio Balboni commented; "It's a difficult print for the ECB, disinflation on the goods side is coming to an end and services inflation remains high."

Services-sector inflation did edge lower to 4.0% from 4.1% and ABN Amro was slightly more positive; "This kind of pushback bodes well for the medium-term inflation outlook.”

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TAGS: Pound Euro Forecasts