Pound to Euro News: GBP/EUR Exchange Rate Firms as ECB Cuts Interest Rates

October 18, 2024 - Written by John Cameron

STORY LINK Pound to Euro News: GBP/EUR Exchange Rate Firms as ECB Cuts Interest Rates

The Pound Euro (GBP/EUR) exchange rate found some success on Thursday as the European Central Bank (ECB) delivered its third interest rate cut of 2024.

At the time of writing, GBP/EUR traded at €1.1987, up 0.3% on the day.

The Pound (GBP) started Thursday on a muted note, still feeling the impact of Wednesday's disappointing inflation data.

September's consumer price index revealed that UK inflation cooled more than expected, falling from 2.2% to 1.7%, missing the forecast of 1.9% and undershooting the Bank of England's (BoE) 2% target.

This raised expectations for consecutive interest rate cuts by the BoE in November and December, putting significant pressure on the Pound.

On Thursday, Sterling remained subdued due to the absence of new data, leaving investors to dwell on the weak CPI figures and the potential for BoE rate cuts.

Nevertheless, GBP/EUR managed to edge upward as the Euro (EUR) grappled with its own set of issues.

The Euro started Thursday on a subdued note as investors waited for the European Central Bank's interest rate decision. As the day unfolded, anticipation of an ECB rate cut began to put pressure on the common currency.

As widely expected, the ECB announced its third interest rate cut of the year. However, the bank's mixed messaging – acknowledging that the disinflationary process is 'well on track' while also forecasting a rise in inflation in the coming months – helped to limit the Euro's losses.

Looking forward, the Pound Euro exchange rate may come under pressure on Friday with the release of the UK's latest retail sales report.

Currently, economists are forecasting a 0.3% decline in UK sales growth for September. This could weigh on the Pound, as a drop in consumer spending may exacerbate existing concerns about a slowdown in the British economy.

In turn, this could also intensify speculation about further interest rate cuts by the Bank of England. Sterling could therefore end the week on a sour note.

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TAGS: Pound Euro Forecasts