GBP/EUR exchange rate week review: pound trapped in narrow range against euro
The pound was rangebound against the euro after central banker comments and economic data extend rate cut projections.
(26/02/2024 to 01/03/2024)
Monday
The GBP/EUR exchange rate was static on Monday ahead of speeches by Bank of England (BoE) and European Central Bank (ECB) officials. The pair slid below 1.17 following hawkish comments by ECB President Christine Lagarde that stoked investor bets that the central bank will keep interest rates on hold.
Tuesday
The pound felt the weight of cooler-than-expected UK food inflation figures on Tuesday that fuelled BoE rate cut speculation. Euro gains were capped by a gloomy GfK consumer sentiment index that indicated confidence is low within the German economy – the largest in the Eurozone – amid rising prices.
Wednesday
The GBP/EUR exchange rate traded sideways in the 1.16 range on Wednesday. Waning economic sentiment in the Eurozone meant hawkish comments from BoE Deputy Governor, Dave Ramsden the previous day lent the pound modest support.
Thursday
The GBP/EUR pair remained trapped in a narrow range on Thursday. Both currencies were muted amid a UK data lull and a series of underwhelming German economic data releases – notably January retail sales figures that printed below expectations.
Friday
The pound to euro exchange rate continued to move without a clear direction on Friday. Warmer-than-forecast headline inflation in the Eurozone couldn’t change its course. Despite easing to 2.6% in February, the figure was higher than expected.
The figures reinforced recent ECB signals that interest rates should remain ‘higher for longer’ to cool stubborn inflation and aligned with rate-setters’ data-driven approach towards monetary policy.
Meanwhile, BoE chief economist Huw Pill said the central bank is still “some way off” cutting interest rates – hawkish comments that helped the pound hold its own against the euro.
The pair ended the week at 1.166.
Looking ahead
The pound has been relatively calm ahead of the spring budget on Wednesday. With support for the ruling Conservative Party disintegrating in the polls, some last-ditch tax cuts may be in the offing from UK Chancellor of the Exchequer Jeremy Hunt. Although doubts persist over how much fiscal headroom the government has for such munificence.
The ECB is expected to revise inflation expectations lower at its next meeting of rate-setters on Thursday, following a recent fall in annual inflation to 2.6% – but to leave interest rates unchanged again.