Pound to Euro Retreats from 1.20

September 26, 2024 - Written by John Cameron

STORY LINK Pound to Euro Retreats from 1.20

The Pound Euro (GBP/EUR) exchange rate dropped on Wednesday morning as the pairing pulled back from its 26-month high seen earlier in the week.

The Pound (GBP) fell back on Wednesday as GBP investors sought to book their profits in the wake of Sterling’s recent surge.

GBP exchange rates have rallied to multi-month highs over the past week, following Bank of England’s (BoE) decision to diverge from the European Central Bank (ECB) and Federal Reserve by opting not to raise interest rates this month.

However, this momentum has begun to face, with Sterling sentiment being knocked by Monday’s disappointing UK services PMI and a shift in market sentiment.

The slide in the Pound also came despite hawkish comments from BoE policymaker Megan Greene, who echoed Governor Andrew Bailey’s view of a gradual approach to future rate cuts.

Greene, said:

‘It’s appropriate to take a gradual approach to removing restrictiveness. A cautious, steady-as-she goes approach to monetary policy easing is appropriate.’

While the Euro (EUR) gained against the Pound, it struggled against other currencies on Wednesday amid persistent concerns over the Eurozone economy.

Recent data has underscored the region’s economic woes, particularly in Germany, where fears of a recession have intensified as activity in the country’s vital manufacturing sector rapidly declines.

These ongoing concerns have led some investors to speculate that the ECB may speed up the pace of its monetary policy easing to support economic activity in the bloc.

While the ECB was reluctant to commit to another rate cut in October, EUR investors are increasingly confident the bank’s hand will be forced by recent data.

GBP/EUR Near-Term Forecast: German Consumer Confidence Weakness to Weigh on the Euro?

Looking ahead, the Pound to Euro exchange rate may find support on Thursday following the release of Germany’s latest consumer confidence figures.

If the GFK index reports a further deterioration in sentiment, the Euro could face additional selling pressure.

EUR exchange rates may also be influenced by speech from ECB President Christine Lagarde. EUR investors will be looking out for any dovish signals, which could further weaken the Euro.

Meanwhile, with little UK economic data due on Thursday, the Pound is likely to be influenced by broader market risk sentiment.

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TAGS: Pound Euro Forecasts