GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse
  • Pound (GBP) disappointed by BoE meeting
  • BoE remained in wait and see mode
  • Euro (EUR) supported by upbeat German IFO business sentiment data
  • German consumer confidence up next

The Pound Euro (GBP/EUR) exchange rate is ticking a few pips lower. The pair settled -0.3% lower at €1.1666 after dropping as low at  €1.1638 earlier in the session.  At 05:45 UTC, GBP/EUR trades -0.04% at €1.1663. The pair is on track to gain 0.2% across the week.

The Pound fell amid disappointment from the Bank of England. As expected, the central bank kept policy unchanged with interest rates at 0.1% and £875 billion in QE. The MPC voted to keep QE unchanged 8-1, the same as in the May meeting.

Given the improving economic picture, recovering jobs market and above target inflation at 2.1%, the market had been expecting a more hawkish tilt from the UK central bank.

The BoE was upbeat on the growth prospects, and saw inflation rising to 3% – however this would be transitory and ease back to 2%

There is also likely to be a level of hesitancy over the rising number of covid cases owing to the delta variant and also the ending of the furlough scheme in the Autumn. The BoE may want to see how this plays out before tightening policy.

There is no economic  data due from the UK today. Investors will continue digesting the BoE meeting and the British government’s changes to its travel plan.

The Euro rose in the previous session thanks in part to a encouraging German IFO economic sentiment data. The closely watched data revealed that the business climate index rose to 101.8 in June against 100.6 forecast. German business confidence hit its highest level since  the end of 2018 as covid restrictions were lifted and expectations surrounding future activity picked up.

Today the focus will remain on Germany with the GFK German consumer confidence numbers. Consumer morale in the Eurozone’s largest economy is expected to improve from -7 to -4. A strong reading could boost the Euro.