GBP/EUR: Brexit Hopes Keep Pound Elevated Above Euro
  • Pound (GBP) falls ahead of quiet session
  • BoE may hold fire on December rate hike
  • Euro (EUR) pair rises paring losses from earlier in the week
  • ECB President Christine Lagarde to speak

The Pound Euro (GBP/EUR) exchange rate is. The pair gained 0.5% on Tuesday settling at €1.1763, after rising as high as €1.1765 earlier in the session. At 05:45 UTC, GBP/EUR trades +0.20% at €1.1751.

The Pound found support on Tuesday from an improved mood in the market. Fears over Omicron eased after several medical experts from different countries said that symptoms from the new strain are so far mild.

Today the Pound is slipping amid growing expectation that the Bank of England will hold back on raising interest rates at its next monetary policy meeting on December 16th owing to uncertainties surrounding the Omicron strain.

Michael Saunders a known BoE hawk actually acknowledged that there “could be advantages to waiting to see more evidence of Omicron’s impact.”

The Euro came under pressure on Tuesday after a mixed bag of data. On the one hand Eurozone GDP data was upwardly revised to growth of 3.9% year on year in the final revision for the third quarter. The quarter on quarter reading was unrevised at 2.2%.

German indusatrial production numbers were also surprisingly upbeat. Factory output in the eurozone’s largest economy rose 2.8% month on month in October, up from a -0.5% decline in September and well above the 0.8% increase forecast. The data was a stark contrast to German factory orders released yesterday which revealed a -6.9% decline.

Meanwhile German ZEW sentiment data was also sending mixed messages. On the one hand the forward looking component fared better than analysts were expecting. On the other hand, the current conditions component was significantly worse than forecast as a fourth COVID wave, supply chain bottlenecks and surging inflation hit morale.

Today the Euro is edging higher. There is no high impacting data from the bloc. Investors will look towards a speech by Christine Lagarde for further clues over the direction of monetary policy.