GBP EUR Gains on Goldman Sachs Rate Outlook

GBP EUR Gains on Goldman Sachs Rate Outlook

The GBP EUR exchange rate was 0.27% higher on Thursday after investment bank Goldman Sachs brought their interest rate hike expectations forward by a year. This week’s strong employment and inflation numbers have seen analysts reassess their dovish outlooks.

The GBP to EUR trades at 1.1745 with Eurozone inflation ahead today.

Goldman Sachs see earlier Bank of England hike

Investment bank Goldman Sachs have boosted the pound versus the euro after they brought their anticipated Bank of England rate hike forward by more than a year, following this week’s stronger-than-expected UK employment and inflation reports.

“The recent data on the UK labour market have been stronger than expected, and indicators imply a smoother furlough unwind than we previously assumed,” said Steffan Ball, Chief UK Economist at the bank.

The ONS this week said that employment levels in the UK were back to pre-crisis levels while wage growth increased by 8.3% in July. Vacancies were also shown to be at a record which helps the ending of the furlough scheme this month.

“Our analysis suggests that underlying wage growth is strong and inflation pressures are firming more than anticipated,” said Ball.

“MPC member commentary, combined with the new Chief Economist appointment, suggests that a majority of the committee now view the minimum conditions for starting monetary policy tightening have been met,” added Ball.

As a result, Goldman Sachs have changed their baseline forecast for interest rate lift-off to next May. The bank’s previous forecast was for the first increase in the third quarter of 2023.

MPs urge Bank of England to regulate fossil finance

Dozens of peers and MPs have sent a letter to the Bank of England Governor Andrew Bailey urging him to tighten rules on fossil fuel financing ahead of the COP26 Climate Summit.

More than 50 MPs and peers from across Britain’s political parties have written to the central bank’s governor, Andrew Bailey, calling for tougher regulations on “fossil finance” and more active support for the green economy.

 

The open letter warned that climate change and biodiversity losses are already jeopardising the Bank’s ability to meet its core objectives of maintaining monetary and financial stability.

Despite climate targets being officially included in the remit of the central bank’s monetary and financial policy committees this year, the Bank of England continues to ignore a financial sector that funds “environmentally destructive projects, under-prices climate-related risk, and delivers insufficient capital to green investments,” the letter warns.

Green MP Caroline Lucas said: “Finance has been identified as a COP26 priority by the UK, so we need to get our own house in order. That starts with the Bank of England setting out clear rules to penalise fossil fuel lending and encourage the essential investment in sustainable infrastructure and green jobs.”

Trade unions warned this week that hundreds of thousands of jobs could be missed if the government doesn’t speed up its approach to net zero.