Pound Euro Exchange Rate News: GBP/EUR Weakened by ECB Hawkish Comments

September 15, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Weakened by ECB Hawkish Comments

GBP/EUR Exchange Rate Weakened by ECB Vice President’s Hawkish Comments

The Pound to Euro (GBP/EUR) exchange rate fell on Thursday following hawkish comments from a European Central Bank (ECB) policymaker.

At time of writing the GBP/EUR exchange rate traded at around €1.1518, which was up roughly 0.4% from Thursday’s opening rate.

Euro (EUR) Strengthened by Hawkish ECB Rhetoric

The Euro (EUR) strengthened on Thursday following hawkish comments made by European Central Bank vice president Luis de Guindos.

De Guindoes reaffirmed the ECB’s commitment to prioritise lowering inflation over growth concerns.

In his speech de Guindos said:

‘Monetary policy needs to be focused on price stability.’


‘Determined action is essential to keep inflation expectations anchored, which in itself contributes to delivering price stability and avoids second-round effects in inflation.’

These comments echoed another ECB policymaker, Gabriel Makhlouf, who stated that continuing to raise interest rates is absolutely necessary.

This left EUR investors with little doubt that the ECB will pursue an aggressive interest rate hike at their next meeting. Investors currently forecast that the ECB will rise rates by another 75bps in October.

As a result, the Euro was able to strengthen amongst most of its peers on Thursday, despite early muted trade.

Pound (GBP) Rangebound amid Lack of UK Data

The Pound (GBP) struggled against its peers on Thursday as a lack of UK data left the currency without any strong directional bias.

This came after GBP exchange rates rallied on Wednesday on the back of another uptick in the UK’s core inflation print in August.


Whilst there was a lack of movement investors weren’t idle. Instead, they turned their attention the upbeat UK data released over the week. Such positive data underpinned certainty of a 75bps hike at the Bank of England’s (BoE) meeting next week.

Economists at ING share this certainty as one reported:

‘Markets are currently pricing in 67 bps of tightening at next week's BoE meeting, and we see a good probability of markets fully pricing in a 75 bps hike in the coming days.’

Despite the optimism of an aggressive rate hike decision next week, GBP investors remained timid due to lack of data. This kept the Pound Euro exchange rate down throughout Thursday trade.

GBP/EUR Exchange Rate Forecast: Weak U Retail Sales to Weigh on Sterling?

The Pound Euro exchange rate could face some headwinds at the end of this week, following the publication of the UK’s latest retail sales figures.

Economists forecast sales growth will have contracted by 0.5% in August, following a 0.5% expansion the previous month.

An underwhelming retail sales release could highlight the pressures facing consumers due to the cost of living crisis, likely leaving Sterling to weaken on Friday amid renewed recession fears.

Meanwhile, Friday will also see the release of the Eurozone’s latest inflation release.

If August’s finalised figures are expected to confirm Eurozone inflation accelerated to a new record high. Likely cementing ECB rate hike bets and lifting the Euro.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Pound Euro Forecasts