GBP/EUR: Euro Jumps vs. Pound As German Coalition Averts Collapse
  • Pound (GBP) rebounds on more hawkish BoE commentary
  • This week is a quiet week UK data wise
  • Euro (EUR) falls on dovish ECB
  • German ZEW sentiment data due

The Pound Euro (GBP/EUR) exchange rate is extending gains for a second straight session . The pair advanced in the previous session after two straight days of losses, settling on Monday +0.31% at €1.1699 towards the high of the day. At 05:45 UTC, GBP/EUR trades +0.03% at €1.1702.

The Pound rebounded on Monday after the Bank of England once again ramped up its hawkish rhetoric. The BoE Governor Andrew Bailey said that the central bank will have to act to bring inflation under control if it sees expectations of higher inflation lifting wages.

Andrew Bailey’s comments come following the BoE interest rate decision last week which was much more dovish than the market had been anticipating. The central bank voted 7-2 to keep interest rates unchanged, just two weeks after Andrew Bailey said that the BoE would need to act to contain inflation expectations.

Separately news that UK COVID cases have fallen 16% over the past week and news that the UK has become the first country to approve the antiviral pill Molnupiravir for trialing later this month also support the Pound.

Looking ahead the UK economic calendar is quiet. Attention will remain on BoE Andrew Bailey who is due to speak again today.

The Euro traded under pressure on Monday after European Central Bank continued to talk down the prospect of an interest rate cut, insisting that inflation is transitory. ECB chief economic Philip Lane insisted that inflation in the eurozone was not a chronic problem, it is instead a passing one.

Separately according to the research institute Sentix, eurozone investor confidence rebounded off a six-month low in November, rising to 18.3, up from 16.9. The improvement came as investors appear to expect supply chain bottlenecks and higher prices to only hold up the economy temporarily. Even so, 18.3 was still short of the 18.6 forecast it was the first rise in investor confidence in three months.

Looking ahead German ZEW economic sentiment data will be in focus. Sentiment is expected to rick lower in November.