BoE Interest Rate Decision Delivers Pound to Euro Exchange Rate Gains

September 19, 2024 - Written by John Cameron

STORY LINK BoE Interest Rate Decision Delivers Pound to Euro Exchange Rate Gains

The Pound Euro (GBP/EUR) exchange rate firmed on Thursday following the Bank of England’s (BoE) latest interest rate decision.

At the time of writing, the GBP/EUR was trading at around €1.1903, up roughly 0.2% from Thursday’s opening levels.

The Pound (GBP) strengthened against most of its peers on Thursday following the Bank of England's latest interest rate decision.

The central bank kept rates unchanged at 5% in a widely expected move, marking its first meeting since its previous rate cut.

This steadfast approach, coupled with hawkish remarks from BoE Governor Andrew Bailey, bolstered Sterling sentiment.

Bailey, commenting on the future trajectory of monetary policy, hinted at a more gradual unwinding cycle and cautioned against "cutting rates too fast," further buoying the Pound.

Bailey commented: ‘If that continues, we should be able to reduce rates gradually over time. But it’s vital that inflation stays low, so we need to be careful not to cut too fast or by too much.’

The Euro (EUR) endured a mixed trading session on Thursday, with a lack of domestic data leaving EUR exchange rates mostly directionless.

Adding to the Euro's woes was a prevailing risk-on market mood, sparked by the Federal Reserve's aggressive 50 basis-point rate cut on Wednesday.

This shift in sentiment saw investors reject safe-haven assets in favour of riskier currencies, leaving the Euro on the defensive and softening against its risk-sensitive peers.

GBP/EUR Exchange Rate Forecast: UK data to Remain in the Limelight

Looking ahead, the Pound Euro (GBP/EUR) exchange rate is poised to take its lead from the UK’s latest retail sales figures, scheduled for release on Friday.

A modest decline from 0.5% to 0.4% is forecast, which could leave the Pound vulnerable as the week concludes.

Meanwhile, the Eurozone will unveil its preliminary consumer confidence index. If Friday’s reading confirms continued weak sentiment in September, the Euro could finish the week on a downbeat note.

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TAGS: Pound Euro Forecasts