GBP/EUR exchange rate midweek update: pound hits multi-year high versus euro
09/12/2024 to 11/12/2024: The pound euro (GBP/EUR) exchange rate surged to its highest level in over two-and-a-half years as investors expect the European Central Bank to cut interest rates and provide dovish guidance on Thursday.
Monday
The pound euro (GBP/EUR) exchange rate traded without a clear direction through the 1.20 range amid a data lull on both sides.
Having drifted higher against the safe-haven euro the risk-sensitive pound’s marginal gains were eroded by the single currency’s negative trading relationship with an under-pressure dollar.
Tuesday
The pound euro exchange rate broke through the 1.21 resistance level, hitting its strongest level since April 2022. Fuelling its sharp rise were investor bets that the Bank of England (BoE) will cut interest rates less aggressively than the European Central Bank (ECB), as rate-setters prepare to unwind policy to support the flagging Eurozone economy.
Wednesday
With macroeconomic data still thin on the ground on both sides, the pound euro exchange rate extended its gains. The pair touched a fresh multi-year high ahead of a potentially dovish ECB rate hike on Thursday, which continued to undermine the single currency. By contrast, the BoE is seen keeping its current policy next week.
The pressure on the euro increased after the dollar was bolstered by a marginal uptick in US inflation, which reinforced Fed rate cut expectations.
Looking ahead
The ECB is widely expected to reduce borrowing costs by a quarter point on Thursday to support the bloc’s economy. However, some economists think it could take a bolder approach and cut by 50bp – a move that would prompt further weakening in the euro.
On Friday, the latest GDP growth data for the UK economy hits the headlines, which is expected to show a marginal uptick from the previous negative reading, which could support the pound.