Pound Euro Exchange Rate Rises amid BoE-ECB Policy Divergence

September 27, 2024 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Rises amid BoE-ECB Policy Divergence

The Pound Euro (GBP/EUR) exchange rate saw a slight rise early in Thursday's session, bolstered by the expected policy divergence between the Bank of England (BoE) and the European Central Bank (ECB), along with a risk-on market mood.

At the time of writing, GBP/EUR was trading at €1.1985, marking a 0.2% increase for the day.

The increasingly risk-sensitive Pound (GBP) found some support on Thursday as market sentiment improved.

Hopes for a ceasefire agreement between Israel and Hezbollah in Lebanon helped ease recent investor anxiety, following heightened fears of a broader conflict due to intensified Israeli airstrikes.

However, gains for the Pound were capped by a decline in UK consumer confidence, as highlighted by the British Retail Consortium’s latest report.

The Euro (EUR) came under mild pressure on Thursday after the ECB released its latest Economic Bulletin.

The September report on the Eurozone’s economic and monetary conditions reiterated that growth and activity in the bloc have been weaker than the ECB’s June projections, with risks to growth remaining skewed to the downside.

The bulletin also indicated that inflation and wage growth are expected to ease, paving the way for potential further interest rate cuts.

While this information wasn’t new, it served as a reminder to investors of the ECB’s dovish position compared to the Bank of England.

Looking ahead, Friday's fresh economic data may influence the Pound Euro exchange rate, with Eurozone figures possibly taking the spotlight. The bloc’s upcoming economic sentiment report is expected to show a slight dip in investor confidence, which may have a limited effect on the Euro. However, an unexpected result could trigger more significant movement.

Germany’s unemployment figures could have a greater impact, as a rise in jobless numbers in the Eurozone's largest economy may fuel fears of a recession, potentially weighing on the Euro.

In the UK, the Confederation of British Industry’s (CBI) distributive trades survey is the only release. Another weak reading could put pressure on the Pound.

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TAGS: Euro Forecasts Pound Sterling Forecasts