The pound surged higher versus the euro on Thursday, after the Bank of England held off from cutting interest rates. The pound euro exchange rate jumped to a peak of €1.1887, before easing slightly into the close. The pair ended Thursday’s session at €1.1865. Sterling is extending those gains as trading kicks off on Friday, the day that the UK officially leaves the EU.
GBP/EUR – Three and a half years after the Brexit, UK will leave EU at 11pm
Three and a half years after the Brexit referendum and three Prime Ministers later, the UK will leave the EU at 11pm GMT time. The UK’s exit is planned and priced in, so it is not expected to bring immediate volatility. It could, however, refocus investors attention towards trade and the tough negotiations that lie ahead.
Boris Johnson is due to warn that sovereignty is more important than smooth trade in a speech next week. This will set a fighting tone for complex negotiations and could increase fears that the UK will end the transition period without a deal. However, he has also announced a tax cut, raising the threshold for National Insurance payments, which is lifting the pound, adding to yesterday’s gains.
Yesterday, the BoE voted to keep interest rates on hold at 0.75%. The vote split was 7-2. This was a more hawkish split than what had been expected by market participants. The fact that the central bank voted overwhelmingly in favour of keeping rates on hold sent the pound soaring. Investors even managed to look past the fact that the BoE cut growth forecasts for the UK to the lowest level since the second world war. Growth this year is now expected at just 0.8%, down from 1.2%. Growth next year is expected at 1.5% down from 1.7%.
Euro
The euro traded higher versus its peers in the previous session, albeit lower versus the pound as the eurozone unemployment rate hit a new decade low. Unemployment ticked down to 7.4% in December. Continued job growth bodes well for the service sector and business confidence going forward.
Today investors will look towards the release of a slew of European data releases including French & Italian GDP, German retail sales and European inflation. The latter is expected to be the most closely watched and could boost the euro as analysts forecast an uptick in consumer prices to 1.4%.
| What do these figures mean? |
| When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute.
For example, it could be written: 1 GBP = 1.13990 EUR Here, £1 is equivalent to approximately €1.14. This specifically measures the pound’s worth against the euro. If the euro amount increases in this pairing, it’s positive for the pound . Or, if you were looking at it the other way around: 1 EUR = 0.87271 GBP In this example, €1 is equivalent to approximately £0.87. This measures the euro’s worth versus the British pound. If the sterling number gets larger, it’s good news for the euro. |
