Pound Sterling’s Further Strength Could Be Limited Versus the Euro

Pound to Euro Falls as Further COVID Restrictions Announced

Yesterdays Bank of England (BoE) interest rate decision saw the GBP soar over its opponents after days of pre-meeting jitters. Rivals like the Euro had benefitted from the Pound Sterling’s volatility as its investors flocked to safe-haven currencies whilst odds of a rate cut continued to rise. However, now with the decision made and confidence once again restored in the GBP, the BoE looks set on building upon recent economic data releases and reminding the market that the UK economy is on the rebound. But strategists at the Bank of America have noted that further strength for the Pound Sterling is unlikely versus the Euro and US Dollar going forward.

Bank of England Hold Interest Rates Steady After a Week of Volatility

Yesterday was a positive day for GBP, with their central bank, the Bank of England announcing that it will keep its cash rate stable at 0.75%. Investors were concerned that the bank may make a cut after interest rate cut bets rose to around 50-60% before the meeting. As a result, many investors fled to safe haven currencies like the USD and JPY. However, with the decision coming in favour of GBP, investor’s confidence has returned to the currency and support for the GBP is once more restored.

The Bank of England noted the UK’s performance in recent economic releases within their meeting minutes and looked to build upon these figures. They also highlighted a revision in their outlook for the GBP for the rest of 2020, 2021 and 2022. The revised figures dropped slightly as the central bank noted they may have been over ambitious in their predictions previously, emphasising the impact that Brexit will likely have on the economy moving forward in the short-term.

Analysts at the Bank of America State That the Pound Sterling’s Gains Are Likely to Reach a Peak Soon

Anthanasios Vamvakidis, a strategist at Bank of America highlighted that for now, we would expect cable to stabilise slightly above 1.30, but further strength is unlikely. He says that the GBP’s rally in wake of the BoE decision is justified but moving forward data releases and EU-UK trade talks are likely to steal the spotlight, and the path forward is unlikely to be clear-cut. For now, though, the GBP edges over both the Euro and USD. The Pound to Euro exchange rate currently sits at a high of 1.1890 having been as low as 1.1630 at January’s lowest point on the 14th. The UK is set to leave the EU at 23:00 GMT today and this will likely spark the Brexit flares once more as both nations move into a period of long negotiations to attempt a trade-deal resolution.

If you have any GBP/EUR currency transfers to consider and wish to be kept up to date with all the events and news in the market ahead of this potential crucial time. Feel free to contact myself, Jonathan Watson, using the form below.