- Pound (GBP) rises after 2 days of losses
- BoE leaves interest rates unchanged
- Euro (EUR) looks to the ECB rate decision
- No rate hike is expected
The Pound Euro (GBP/EUR) exchange rate has jumped, snapping a two-day losing streak. The pair fell -0.30% in the previous session, settling on Wednesday at €1.1601 and trading in a range between €1.1586 – €1.1649. At 09:00 UTC, GBP/EUR trades +30% at €1.1640.
The Bank of England left interest rates on hold as expected at 5.25% a 15-year high of the nine policy members six voted to leave rates unchanged and three policy members voted in favour of hiking interest rates by 25 basis points.
Unlike the Federal Reserve yesterday the Bank of England gives no hints as to when. It might start cutting interest rates, saying instead that there is still some way to go in its fight against inflation.
The Bank of England is seen as lagging behind other central banks in cutting rates which, for the time being, is boosting the pound. However, it does raise concerns over the growth outlet.
Meanwhile, the euro is looking to the European Central Bank interest rate decision, where the central bank is expected to leave rates on hold at 4%, a record high for another month.
The ECB heads into the meeting with eurozone inflation at 2.4% year on year, close to the central bank’s 2% target. Meanwhile, the economy is in danger of tipping into recession in the final quarter of the year.
With this in mind, the ECB is expected to be the first major bank to cut interest rates in 2024. However, policymakers have sent out mixed messages. On the one hand, ECB president Christine Lagarde pushed back on rate cut expectations, saying that the fight against inflation has not been won. She highlighted strong wage growth has a risk has an upside risk to inflation.
Meanwhile, known hawk, ECB policymaker Isabel Schnabel has indicated that the next move by the ECB could be a rate cut.
A dovish ECB could pull the euro lower against the pound, particularly after the hawkish BoE vote.
