Growing BoE Rate Cut Speculation Prompts Pound to Euro Rate Slide

October 8, 2024 - Written by Frank Davies

STORY LINK Growing BoE Rate Cut Speculation Prompts Pound to Euro Rate Slide

GBP/EUR Exchange Rate Struggles to Hold Above €1.19

The Pound to Euro (GBP/EUR) exchange rate started the week on a negative note as increased speculation regarding the pace of interest rate cuts from the Bank of England (BoE) pressured Sterling sentiment.

At the time of writing, GBP/EUR was trading around €1.1925, down roughly 0.2% from Monday’s opening levels.

The Pound (GBP) came under renewed selling pressure on Monday amid growing expectations that the BoE may reduce interest rates as a more aggressive pace than previously anticipated.

GBP exchange rates plummeted last week following comments from BoE Governor Andrew Bailey, who suggested last week that the central bank might move ‘more aggressively’ with rate cuts if inflation remains under control.

BoE Chief Economist Huw Pill helped to reversed some of these losses on Friday as he warned against cutting interest rates too quickly.

However, with the focus within the bank seeming to have shifted toward how soon monetary easing will begin rather whether it is appropriate, Sterling’s recent strength is fading.

Additionally, market sentiment was dampened by ongoing geopolitical tensions in the Middle East, placing further stain on the Pound.

While the Euro (EUR) gained ground against the Pound, it faced challenges against other currencies on Monday due to mixed economic data from the Eurozone.

The Euro initially faltered after Germany reported a sharp 5.8% drop in factory orders for August, raising concerns about the country’s industrial sector.

However, the single currency regained some momentum as data later revealed a recovery in Eurozone retail sales during the same period.

Elsewhere remarks from European Central Bank (ECB) policymaker François Villeroy de Galhau, who hinted at the possibility of another rate cut this month, weighed on the Euro through the day.

GBP/EUR Forecast: Weak German Industrial Production Data to Pressure the Euro?

Looking ahead, the Pound to Euro exchange rate could strengthen on Tuesday following the release of Germany’s latest industrial production figures.

If the data shows a larger-than-expected contraction in factory output for August, it may fuel concerns that the Eurozone’s largest economy is sliding toward recession, which could drag on the Euro.

Meanwhile, with little significant UK economic data on the horizon, any further gains for the Pound may be limited as investors continue to factor in potential BoE rate cuts.

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TAGS: Pound Euro Forecasts