British Pound Euro Exchange Rate Forecast: GBP EUR Slides on Bank of England Commentary

August 6, 2015 - Written by John Cameron

STORY LINK British Pound Euro Exchange Rate Forecast: GBP EUR Slides on Bank of England Commentary

Pound Could Extend Declines if Deficit Widens

Sterling tumbled across the board yesterday after the Bank of England released a disappointing inflation report and less hawkish than expected meeting minutes. If today's UK trade data shows a narrowing in the nation's deficit, the Pound could extend declines against the Euro and US Dollar as trading continues.

Earlier...

Dovish BoE Sends Pound Sterling Lower against EUR, USD, AUD Exchange Rates Today

Support for the Pound Sterling (currency : GBP) took a hit during this afternoon’s session following the publication of some worrying forecasts from the Bank of England (BoE).

For the first time since its inception in the year 1694, the UK’s central bank, known as the Old Lady of Threadneedle Street thanks to the legend of Sarah Whitehead, whose ghost is said to haunt the Bank's garden, published the minutes of its latest monetary policy meeting at the same time as the policy announcement itself. To add to the raft of information being released, the BoE also published its latest Quarterly Inflation Report at the same time.

Interest Rates Remain on Hold, Hike Not Predicted until 2016

The revelation that, for the 78th month on the trot, British interest rates would be remaining at their record low level of 0.50% for at least another month surprised no-one. However, the disclosure in the minutes that only one of the nine man policy committee had voted in favour of a rate hike did catch a few investors on the back foot. The committee had been split 7-2 against a rate hike during the early months of this year and given Governor Mark Carney’s assertion of last month that domestic rates could be on their way Northwards at the ‘turn of the year’ had lead many to forecast that at least two members might come out in favour of an increase for this month.

Pound Sterling to Euro (GBP/EUR) Falls from Best Conversion Rate after BoE Comments

Meanwhile, the headline prediction contained in the inflation report saw the Bank of England slash its price rise forecasts for the UK economy, while the BoE Governor Mark Carney asserted in his press conference which followed the triple release that he expected the pace of domestic inflation to remain ‘muted’. He went on to give a more downbeat assessment than was expected of when UK policy might be tightening, stating that, ‘the exact timing of the first move cannot be predicted in advance,’ adding that, ‘it will be the product of economic developments and prospects. In short, it will be data dependent.’

The Pound Sterling euro exchange rate suffered as a result; the pair had been changing hands at as high as 1.4357 GBP EUR during early trading but by the final stages of the European equities session, the pair had slumped to trade back down into the 1.4100s.

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TAGS: Euro Forecasts Euro Pound Forecasts Pound Euro Forecasts