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Euro Pound (EUR/GBP) Exchange Rate Falls Ahead of BoE Governor Bailey Speech

August 26, 2020 - Written by John Cameron

Euro Pound Sterling (EUR/GBP) Exchange Rate Falls Ahead of Key BoE Speech

The Euro Pound Sterling (EUR/GBP) exchange rate edged around -0.2% lower, leaving the pairing trading at around £0.8979.

The Pound was able to make some gains against the Euro this morning, although these gains were capped as Brexit uncertainty left traders on the back foot.

Sterling traders are focused on the next biggest event, a speech at Jackson Hole on Thursday from the Bank of England’s Governor, Andrew Bailey.

Analysts have noted that there are few factors to provide direction for the British currency this week.

In a note to clients, FX analysts at Scotiabank wrote:

‘Sterling price action for the remainder of the week will be almost exclusively determined by external developments, given a bare data calendar at home.

‘It won’t get much better next week, when Markit PMI revisions are the only remotely notable print scheduled for release.’

Sterling has also been supported by a weaker US Dollar, although many analysts expect there to be a correction as traders factor in the risk of the UK leaving the bloc without a deal at the end of the transition period. There is also the risk of the country’s unemployment rate soaring after the government’s furlough scheme ends in October.

Euro (EUR) Falls despite Steady French Consumer Sentiment

The Euro edged lower today despite the latest data from France showed consumer confidence held steady this month.

INSEE statistics agency showed confidence held steady at 94 as unemployment worries fell further in the bloc’s second-largest economy.

Households’ worries about unemployment fell to the lowest level since April when France was stuck in a two-month lockdown due to the coronavirus pandemic.

Although, the single currency struggled as while the country’s general outlook was stable, it was far below the long-term average.

Meanwhile, separate data from France supported EUR after it showed the number of unemployed people in France fell by 172,200 in July.

Added to this, European Central Bank (ECB) Governing Council member, Peter Kazimir noted that the bloc was growing along the lines of the bank’s projections from June.

This means policymakers have time to wait for further hard data. Speaking to Reuters on the sidelines of a news conference, Slovakia’s central bank head Kazimir noted:

‘It seems to me we are in line with the baseline scenario. We have room to wait for hard data, which are reliable.’

The ECB is buying record amounts of debt to keep down borrowing costs, which includes the €1.35 trillion Pandemic Emergency Purchase Programme (PEPP).

While the bank has noted the entire amount is likely to be spent on bond buys, many have argued that there is not an obligation to use all the money.

Speaking to reporters, Kazimir said:

‘I have said in the past that once we have an appropriate response from the fiscal side, then of course we are not obliged to use the whole (PEPP) envelope.

‘What we see is that the PEPP is working and it is a very appropriate response to the crisis.’

Euro Pound Outlook: BoE and French Business Confidence in Focus

Looking ahead to this afternoon, the Pound (GBP) could give up some of today’s gains against the Euro (EUR) following a speech from the Bank of England’s (BoE) Andy Haldane.

If the BoE’s chief economist hints that the bank may send interest rates into negative territory in the near-future, Sterling will suffer losses.

Meanwhile, the single currency could claw back further losses on Thursday morning as traders focus on the latest data from the bloc’s second-largest economy.

If August’s French Business Confidence rises more than expected, it will offer EUR an upswing of support. This will boost the Euro Pound (EUR/GBP) exchange rate and send the pairing higher.

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