The Pound-Euro could stay supported if BoE rate hike bets continue to build, while stronger Eurozone sentiment may offer the Euro some respite.
The Pound to Euro (GBP/EUR) exchange rate traded with modest gains at the start of this week, as Sterling was underpinned by a strengthening of Bank of England (BoE) interest rate expectations.
At the time of writing, the GBP/EUR exchange rate was trading at around €1.1661. Up around 0.3% from the start of Monday’s session.
Pound to Euro (GBP/EUR): 1.166188 (+0.30%)
Euro to Dollar (EUR/USD): 1.136498 (-0.24%)
DAILY RECAP:
The Pound (GBP) edged higher against the majority of its peers on Monday amid growing confidence that the Bank of England (BoE) will restart its hiking cycle in November.
The increasingly hawkish pricing of a November rate hike follows remarks from BoE Governor Andrew Bailey at the end of last week.
Speaking at the University of Oxford’s Monetary Economics Conference on Friday, Bailey suggested that inflationary pressures linked to persistently strong energy prices will make it more difficult for the bank to maintain its current stance on policy.
These comments have been compounded by the latest jump in oil prices, with the global Brent benchmark jumping almost 4% to over $108 a barrel on Monday, after US President Donald Trump rejected a proposal by Iran to reopen the Strait of Hormuz.
The Euro (EUR) stumbled through Monday’s session as it was pressured by its negative correlation with the US Dollar (USD).
Rising safe-haven demand stemming from the latest surge in global oil prices appeared to be the immediate catalyst for the upswing in USD, but this builds on a widely bullish trend for the ‘Greenback’ that has been underpinned by increasingly hawkish repricing of Federal Reserve rate expectations.
At the same time, EUR sentiment was also undermined by a continued rise in European gas prices.
Near-Term GBP/EUR Forecast: Improvement in Eurozone Sentiment to Lift the Euro?
Looking ahead, the next catalyst of movement for the Pound Euro exchange rate will be the publication of the Eurozone’s latest economic sentiment index on Tuesday.
September’s data is forecast to report a continued improvement in morale, which may lend some support to the single currency at the start of the session.
Meanwhile, in the absence of any notable UK economic data, Sterling may trade without any clear direction on Tuesday.
Our currency coverage draws on live market data, official economic releases and published bank research.
