GBP/EUR Forecast – BoE Interest Rate Decision Likely to Impact Exchange Rates

Some form of hope for Sterling

The markets are bracing themselves for today’s Bank of England (BoE) interest rate decision and what could be a key day for GBP/EUR exchange rates.

There has been a growing expectation that the Central Bank will indeed hike rates for the first time since November 2017. With investors having likely factored in a 0.25% rise, which if it occurs will increase the UK’s base rate to 0.75%, the key question now is whether or not Sterling is likely to gain support should the aforementioned increase occur?

Whilst a rise in interest rates is generally considered a positive for the economy in question, we must consider that if a 0.25% increase is being factored in to Sterling’s current value, then we may not see an aggressive upturn should this result come to fruition.

GBP/EUR rates have been marooned around the current levels for some time, with the Pound finding plenty of support around 1.12 but failing to make any significant move towards or above 1.13 over recent weeks.

Even if the BoE do hike rattes, it may be that the Euro continues to find plenty of support around the current levels. In my opinion, it is likely to be BoE Governor Mark Carney’s subsequent address may hold more weight with investors. He will discuss the reasoning behind the Central Bank’s decision to either hike or leave rates on hold and give the markets a deeper insight into the BoE’s current thinking and future plans regarding the UK’s monetary policy.

It is during this speech that the markets may spike more aggressively than after the actual interest rate decision, so any clients with a GBP/EUR currency requirement should be keeping a close eye on the markets during Carney’s speech.

Of course, they must also consider the possibility that the BoE choose to leave interest rates on hold. Should this occur, in my opinion this is still a possibility due to July’s poor inflation data and Retail Sales figures, then you could argue that there would a quick fire sale of GBP positions and the Pound would lose value as a result.

For more information about how the decision and the impression made by the speech afterward from Mark Carney could impact GBPEUR rates get in touch using mtv@currencies.co.uk.