Pound Euro Exchange Rate Flat ahead of BoE Decision and US Election Results

November 6, 2024 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate Flat ahead of BoE Decision and US Election Results

The Pound Euro (GBP/EUR) exchange rate traded sideways on Tuesday as markets looked ahead to incoming high-impact events.

At the time of writing, GBP/EUR traded at €1.1918, virtually unchanged from the start of the session.

The British Pound (GBP) was uncertain on Tuesday as investors held back on bold moves in anticipation of the Bank of England's (BoE) interest rate decision, scheduled for Thursday.

A minor upward adjustment to the UK's services PMI provided some support for GBP, though it failed to trigger significant gains. The final PMI figure came in at 52 for October, down from 52.4 in September but exceeding initial projections of 51.8.

An improvement in market sentiment also bolstered the increasingly risk-sensitive UK currency. Nevertheless, the impending BoE decision continued to cap GBP's movements.

Meanwhile, the Euro (EUR) found support in its strong inverse relationship with a faltering US Dollar (USD).

USD pulled back as markets became less certain of a Donald Trump victory in the US presidential election, with Vice President Kamala Harris edging ahead in polls in several crucial swing states. Since a Trump win was seen as favourable for the ‘Greenback’, increasing bets on a Harris victory put pressure on the currency.

This dynamic bolstered the Euro, enabling the safe-haven currency to hold its ground against the more risk-sensitive Pound, despite an overall improvement in market sentiment.

GBP/EUR Exchange Rate Forecast: Volatility Ahead?

Tomorrow morning, Germany's latest factory orders data is due, with a projected 1.5% rebound potentially giving EUR a lift. However, a predicted 0.6% drop in Eurozone PPI for September might keep gains in check.

EUR investors will also focus on European Central Bank (ECB) President Christine Lagarde's afternoon speech. If Lagarde takes a more cautious stance on future interest rate cuts, following recent GDP and inflation data, the Euro could rally.

Meanwhile, GBP investors might stay on the sidelines ahead of Thursday's BoE decision, potentially keeping the Pound's movements subdued.

The US presidential election results could also shake things up. As votes are tallied, expect potential volatility in the GBP/EUR pair. A Trump win could put significant pressure on the Euro, given his talk of imposing 10% tariffs on European exports.

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TAGS: Pound Euro Forecasts