Select Language

EUR/GBP finds itself back down near multi-year lows after BoE decision

Breaking news

EUR/GBP finds itself back down near multi-year lows after BoE decision

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2024.11.07 23:16
EUR/GBP finds itself back down near multi-year lows after BoE decision

update 2024.11.07 23:16

  • EUR/GBP sinks back down to lows not seen since 2022 after the Bank of England decision on Thursday. 
  • Even though the BoE decided to cut interest rates as expected, their uncertainty over the impact of the Budget supported GBP. 
  • The Euro had a mixed day after weak German export and industrial data but strong overall Retail Sales from the region. 

EUR/GBP trades marginally lower on Thursday, in the 0.8320s as it consolidates just above two-and-a-half year lows, and the bottom of a five-week range. 

The pair started Thursday deep in the red after the release of lackluster German Industrial Production and Export data weighed on the Euro (EUR). 

EUR/GBP Daily Chart

World-renowned exporter Germany suffered a bad month in September as exports fell 1.7%, below both the previous and expected rate. Industrial Production in Europe's largest economy, meanwhile, declined 2.5% in the same period, also below the estimates of economists, though not as low as the month before.

EUR/GBP then recovered and rose during the European session after upbeat Eurozone Retail Sales data showed shoppers continuing to spend liberally despite relatively high borrowing costs and constrained growth. This gave the Single Currency a boost and the pair sailed higher.

Retail Sales in the Euro Area rose by 2.9% YoY in September, and were revised up from 0.8% to 2.3% in August. The result also beat expectations of 1.3%.

On a monthly basis, Retail Sales rose 0.5% which was above expectations of 0.4% but below the previous month's 1.1%, although that figure too was revised up substantially from 0.2%. 

EUR/GBP fell back to the bottom of its five-week range in the low 0.8300s, however, following the Bank of England (BoE) meeting despite the MPC voting by a clear majority of eight to one to lower the bank rate by 0.25% (25 basis points) to 4.75%, with one dissenter preferring them to remain unchanged. This was one more than voted to cut last time.

Lowering interest rates is usually negative for a currency as it reduces foreign capital inflows, however, in the case of the Pound Sterling (GBP) this was not the case on Thursday. Part of the reason may have been because the move was widely telegraphed, another because it remains well above the European Central Bank's (ECB) comparable rate of 3.4% and the divergence favors the Pound

Yet another reason for GBP's outperformance could be the BoE's uncertainty regarding the outlook post the new government's autumn Budget.

In the Budget, the government announced an estimated 70 billion (GBP) of increased spending as well as a rise in the minimum wage. This led economists at the Office of Budgetary Responsibility (OBR) to revise up their forecasts for inflation in the UK to 2.6% in 2025 from 1.1% previously. This, in turn, is expected to lead the BoE to keep interest rates relatively elevated next year, resulting in a stronger Pound. 

In his press conference after the decision, BoE Governor Andrew Bailey said the BoE would be keeping a close eye on inflation but that although he expected the decisions in the Budget to raise prices they would fall back down to target, and that confidence "allowed us to cut rates today". 

At the same time, he added that he did not expect the projected path of interest rates to deviate much as a result of the Chancellor's autumn statement. 

"I do not think it is right to conclude that the path of interest rates will be very different due to budget," said Bailey at the press conference. 




 


Date

Created

 : 2024.11.07

Update

Last updated

 : 2024.11.07

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

NZD/JPY Price Analysis: Pair tumbles and eyes break of 90.00-92.00 range

The NZD/JPY pair has been on a downward trajectory for the past three days, shedding 0.27% on Friday's session to close near the 90.30 level.
New
update2024.11.23 06:57

Silver Price Forecast: XAG/USD surges above $31.00 as US yields fall

Silver price recovered some ground on Friday and reclaimed the $31.00 a troy ounce, boosted by falling US Treasury bond yields and despite a firm US Dollar.
New
update2024.11.23 06:31

NZD/USD Price Analysis: Pair fell to lowest level since November, bears command

The NZD/USD pair extended its losses on Friday, declining by 0.54% to 0.5830, its lowest level since early November.
New
update2024.11.23 06:18

Canadian Dollar loses momentum on Friday

The Canadian Dollar (CAD) waffled into the midrange on Friday, testing into the low side but ultimately getting hamstrung as Canadian data comes in mixed and gets overshadowed by sentiment-bolstering US data prints.
New
update2024.11.23 05:47

Australian Dollar retreats as US Dollar gains momentum after S&P PMI data

The AUD/USD declined just below 0.6500 as the market is focused on the US Dollar's strength.
New
update2024.11.23 05:07

Gold price reaches two-week peak as US yields fall, geopolitical tensions rise

Gold price rallies to a new two-week high on Friday during the North American session as US Treasury bond yields drop.
New
update2024.11.23 04:55

Dow Jones Industrial Average soars another 350 points

The Dow Jones Industrial Average (DJIA) has snapped its recent soft patch, extending its midweek bullish pivot into a firm Friday performance.
New
update2024.11.23 03:56

US Dollar retraces from two-year high after PMI data, geopolitical uncertainty prevails

In Friday's session, the US Dollar Index (DXY) declined slightly after reaching a new two-year high amidst geopolitical instability.
New
update2024.11.23 03:08

Mexican Peso slumps, shrugging off solid data

The Mexican Peso retreats for the third straight day versus the US Dollar, although economic data suggests the country's economy grew in the third quarter while inflation edged lower.
New
update2024.11.23 02:37

A (local) peak in Gold is now imminent - TDS

The downturn in Gold prices underscored by sharp liquidations from macro funds lined up exceptionally well with historical patterns surrounding drawdowns associated with macro fund liquidations from extreme levels, averaging between 7-10% over the last decade, TDS' Senior Commodity Strategist Daniel Ghali notes.
New
update2024.11.23 01:02

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel