GBP/EUR exchange rate midweek update: pound strikes four-week high versus euro
The pound euro (GBP/EUR) exchange rate rose to a four-week high, a fraction below the 1.19 level, amid mounting European Central Bank interest rate cut expectations.
(26/08/2024 to 28/08/2024)
Monday
Despite the UK bank holiday and subsequent data lull, the pound euro (GBP/EUR) exchange rate found support elsewhere. Comments from Federal Reserve Chair Powell and the latest economic figures from the Eurozone reinforced expectations that the Fed and European Central Bank (ECB) will cut interest rates in September – undermining the euro
Meanwhile, investors expect the Bank of England (BoE) to hold its monetary policy steady until at least November – supporting the pound
The pair traded just above 1.18, close to 3-week highs.
The German IFO business confidence index retreated further to 86.6 for August – a six-month low – from 87 in July, although this was above forecasts of 86.
Tuesday
The pound gained on the euro amid mounting bets the BoE will cut rates at a slower pace than the ECB while the British economy outperforms the Eurozone.
The pound’s rise into the 1.18 mid-range was further supported by lacklustre data releases from Germany that undermined the euro.
The quarterly GDP figure confirmed that the largest economy in the Eurozone shrank by 0.1% in Q2, following a 0.2% increase during Q1.
This was compounded by the latest German consumer confidence index, which printed lower than expected for September.
Wednesday
The pound extended its gains against the euro, touching a four-week high just shy of the 1.19 benchmark, amid expectations of an imminent interest rate cut from the ECB, despite hawkish comments from central bank policymakers.
Stoking the dovish expectations were the recently released August PMI data and Q2 wage statistics for Germany, which pointed to an uncertain economic outlook. Activity across the manufacturing and service sectors eased in the bloc’s largest economy, while negotiated wage growth undershot forecasts.
ECB policy expectations overshadowed mounting bets that the strong performance of the UK economy will encourage the BoE to ease off restrictive measures at a slower pace than other central banks.