GBP to EUR Strengthens as Investors Doubt If BoE Will Cut Rates

Sterling vs Euro Rises as UK Job Market Outperforms

The sterling vs euro interbank exchange rate has reached 1.1729 today at the time of writing. By comparison, back on Tuesday 14th, the pound was as weak as 1.1638 versus the Eurozone’s common currency. So it’s since risen by 0.78%, or by close to one cent.

The GBP to EUR interbank exchange rate has gained, because the financial markets are increasingly unsure if the Bank of England (BoE) will cut UK interest rates on January 30th. This is in spite of several BoE policymakers’ suggestions that they might do so.

For example, last Thursday 9th, central bank Governor Mark Carney told a Research Workshop that, if UK economic growth doesn’t pick up in early 2020, this may trigger a “relatively prompt response” from the central bank.

Markets Focus on UK “Green Shoots” Supporting the Pound

Since then however, the markets are paying increasing attention to signs of economic “green shoots” in the UK. For example, recent surveys by the Institute of Directors and Deloitte have found that, following the Tory Party’s election win last month, British businesses feel increasingly confident about the outlook.

January PMIs Due Next Friday 24th Could Affect BoE Decision

We’ll find out if UK economic growth has picked up following the election, at next Friday 24th’s IHS Markit “flash” PMIs (Purchasing Managers’ Indices) for January 2020.

These will show activity in Britain’s services and manufacturing sectors this month, and could influence both the BoE’s interest rate decision, and the value of sterling.

In addition, next week’s key economic data also includes the UK’s unemployment statistics for December, due on Tuesday 21st at 09.30 GMT. These are forecast to show that joblessness rose by 0.1% in the last month of 2019, up to a still historically-low 3.9%.

Meanwhile, the European Central Bank (ECB) announces its next interest rate decision, on Thursday 23rd at 12.45. It’s forecast that the Eurozone’s central bank will keep borrowing costs steady at 0.0%, so a surprise may affect the euro.

If you would like to learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.