GBP/EUR exchange rate midweek update: pound remains buoyant following budget statement

(06/03/2024)

The GBP/EUR exchange rate continued to traverse the 1.16 range on Monday amid a lack of notable economic data from the Eurozone or UK economy. Speculation surrounding the imminent Budget statement had little impact on the pound to euro currency pair.

Despite being static, pound morale was relatively upbeat thanks to diminishing Bank of England (BoE) interest rate cut expectations. The UK has the highest inflation among all G7 economies, which points towards the central bank loosening policy later than its contemporaries.

The pound remained stuck in a narrow range against the euro on Tuesday morning ahead of the Spring Budget – with the likelihood of further tax cuts dominating headlines.

The UK’s finalised services PMIs kept the UK currency buoyant. Despite missing expectations, the powerhouse services sector reported further strong growth in February, raising hopes the economy will rebound from its recession in the first quarter of 2024 – helping the pound to edge above 1.17.

The euro was muted as investors awaited the European Central Bank’s (ECB) March interest rate decision on Thursday. Although rates are expected to be kept on hold, the accompanying press conference will be closely monitored for potential clues surrounding upcoming action.

The pound to euro exchange rate was subdued on Wednesday as markets prepared to digest the Spring Budget. Better-than-forecast German data was overshadowed by speculation about the contents of Jeremy Hunt’s red briefcase.

When it arrived, the Budget sprung few surprises on the pound. The Chancellor stated the economy is forecast to grow by 0.8% this year after dropping into a recession in the second half of 2023. As expected, he went on to announce a raft of tax cuts, including a further 2p reduction to the National Insurance contribution paid by UK workers.

The pound showed little initial reaction, oscillating near 1.17.