Pound Plunges to 9 Month Low Versus the Euro as BoE Disappoints
  • Pound (GBP) steady ahead of BoE meeting
  • UK no change in policy expected
  • Euro (EUR) lacks direction despite surprise rise in consumer morale
  • Eurozone PMI data due

The Pound Euro (GBP/EUR) exchange rate is ticking a few pips lower on Thursday after closing a few pips higher in the previous session .The pair settled up +0.03% on Wednesday at €1.1651 trading again in a very tight range. At 05:45 UTC, GBP/EUR trades -0.01% at €1.1649.

The Pound barely moved again the Euro in the previous session. There was little in the way of fresh catalysts to drive Sterling in any direction. Instead, investors focused on the Bank of England monetary policy announcement later today.

The central bank is not expected to adjust monetary policy. Expectations are for interest rates to remain at 0.1% and the QE programme to remain unchanged.

Heading into the meeting UK inflation is elevated at 3.2% in August. However, GDP growth decelerated in July unexpectedly. Add into the mix the winding up of the furlough scheme, the ongoing supply chain issues owing to covid and Brexit and the energy crisis and its easy to see why the BoE may adopt a wait and see approach.

Whilst it appears to be too early to expect a hawkish shift from the central bank, investors will be paying close attention to see if any other policy member vote to taper the bond buying programme early. At the last meeting Michael Saunders was the lone dissenter.

The BoE is broadly expected to start raising interest rates mid next year.

The Euro held steady in the previous session under pinned by an unexpected rise in consumer confidence. Consumer morale in the bloc picked up in September as the spread of the Delta covid variant was brought under control.

The European Commission’s measure of consumer sentiment rose to -4 up from -5.3 in August. Analyst has forecast a level of -6. It’s worth pointing out that the figure is always a minus figure.

Looking ahead today sees the release of Eurozone PMI data for both manufacturing and services. These are the preliminary readings for September. Activity is expected to tick higher this month compared to last. Strong readings could boost the Euro.