GBP/EUR Rate Rises As Bank Of England Hint At Interest Rate Increase

The British pound is lower against the euro on Wednesday.

Sterling fell after the Governor of the Bank of England told UK lawmakers that negative interest rates  were under ‘active review’.

Both the UK and Eurozone released inflation data and it was the UK that undershot economist’s expectations by the bigger margin, weighing on the pound and giving a lift to the euro.

Pound versus Euro was lower by 49 pips (-0.47%) to 1.1163 as of 3pm GMT.

GBP/EUR dropped below the 1.12 handle in early trading, falling to 1.117 before re-testing 1.12 and turning lower and finally stabilising near 1.115.

Yesterday the exchange rate rose +0.38% but today’s losses take it lower for the week by -0.25%.

GBP: Negative UK rates coming?

In his testimony to the Treasury Select Committee of MPs, the Bank of England’s Andrew Bailey said that the UK central bank was keeping the ‘lower bound’ (meaning the lowest in which interest rates can be cut)- under ‘active review’.

The BOE’s apparent openness to negative interest rates means there is now more space to lower the benchmark UK interest rate further, despite already standing at a record low of only 0.1%. The European Central Bank already has a negative deposit rate in place, which had been one reason for the pound to hold above parity against the euro until now.

EUR: Inflation falling faster in UK

Euro-area inflation fell to just 0.3% year-over-year in April from 0.4% in March but the drop was mostly caused by energy prices and core prices, which strip out food and fuel prices remained steady at 0.9% y/y.

The rate of inflation in the UK was higher than that of Europe as of April, but the rate of change in inflation to the downside was bigger. UK CPI inflation rose 0.8% in April, nearly half the 1.5% in March. Again core prices held steadier but did also declined to 1.4% y/y from 1.6%.

The euro has been building some upside momentum since the announced plans of an ‘EU recovery fund’ late on Monday.


Currencylive.com is a news site only and not a currency trading platform.
Currencylive.com is a site operated by TransferWise Inc. ("We", "Us"), a Delaware Corporation. We do not guarantee that the website will operate in an uninterrupted or error-free manner or is free of viruses or other harmful components. The content on our site is provided for general information only and is not intended as an exhaustive treatment of its subject. We expressly disclaim any contractual or fiduciary relationship with you on the basis of the content of our site, any you may not rely thereon for any purpose. You should consult with qualified professionals or specialists before taking, or refraining from, any action on the basis of the content on our site. Although we make reasonable efforts to update the information on our site, we make no representations, warranties or guarantees, whether express or implied, that the content on our site is accurate, complete or up to date, and DISCLAIM ANY IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. Some of the content posted on this site has been commissioned by Us, but is the work of independent contractors. These contractors are not employees, workers, agents or partners of TransferWise and they do not hold themselves out as one. The information and content posted by these independent contractors have not been verified or approved by Us. The views expressed by these independent contractors on currencylive.com do not represent our views.