Pound Sterling to Euro Exchange Rate Forecast Falls on Bank of England Comments Today, Referendum Starts Up

April 14, 2016 - Written by Toni Johnson

STORY LINK Pound Sterling to Euro Exchange Rate Forecast Falls on Bank of England Comments Today, Referendum Starts Up

The Pound has climbed against the Euro today, on account of the UK Referendum campaign start bringing a supportive speech from Alistair Darling.

Sterling has approached something resembling parity against the Euro today, although it is still weak in the wake of the BoE news.

Bank of England (BoE) Hold Rates, Pound Slides

As anticipated, the Bank of England (BoE) opted to maintain its headline interest rate at its current level of 0.50% at midday today. However, the UK central bank’s assessment of the current state of the British economy convinced few investors and the Pound Sterling (currency : GBP) shipped support in the markets as a result. Considering this week’s higher than expected British CPI inflation numbers, the BoE noted in its accompanying commentary that,

‘Twelve-month CPI inflation increased to 0.5% in March but remains well below the 2% inflation target. This shortfall is due predominantly to unusually large drags from energy and food prices, which are expected to fade over the next year. Despite picking up, core inflation also remains subdued, a consequence of the past appreciation of sterling, weak global inflation and restrained domestic cost growth.’

The Old Lady of Threadneedle Street’s assessment went on to note that,

‘Returning inflation to the 2% target requires balancing the potentially lessening drag from external factors against expected gradual increases in domestic cost growth. Fully offsetting that drag over the short run would, in the MPC’s judgement, involve too rapid an acceleration in domestic costs, one that would risk being excessive and would lead to undesirable volatility in output and employment. Given these considerations, the MPC intends to set monetary policy to ensure that growth is sufficient to return inflation to the target in around two years and keep it there in the absence of further shocks.’

Pound Sterling to Euro exchange rate dropped to an intraday low of 1.2520

Markets took the ‘go for growth’ bent of this forward guidance as a sign that domestic interest rates may now remain lower for longer. The Pound Sterling euro exchange rate dropped to an intraday low of 1.2520 GBP EUR a short time ago as a consequence. Analysts forecast that there could be further losses to come for the pair in the short to medium term.

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TAGS: Euro Forecasts Pound Euro Forecasts Pound Sterling Forecasts