Pound Euro Exchange Rate News: GBP/EUR Traded Erratically as BoE Decision Loomed

September 22, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Traded Erratically as BoE Decision Loomed

Pound (GBP) Subdued as Markets Await BoE Interest Rate Decision

The Pound (GBP) struggled to find much demand in the face of the Bank of England’s (BoE) impending key rate decision.

Weighing on Sterling, however, is no matter which direction the central bank takes in raising interest rates, the Pound could remain under pressure. Many expect a 50bps rate hike, which would mark the seventh consecutive raise, and would bring the interest rate level closer to the highest levels since 2008. However, even if the BoE turn hawkish and raise rates by 75bps, which would be the biggest in 33 years, could pile on further pressure on householders.

With the BoE maintain its position on tackling inflation, UK households could see £3bn extra in mortgage payments if the interest rate is increased by 75bps. Sarah Coles, Senior Personal Finance Analyst at Hargreaves Lansdown, said:

“For anyone who is already struggling with runaway price rises, the extra cost of the mortgage could be the final straw. While anyone with a fixed rate is currently protected, all these rate rises will be adding up and hit them in one fell swoop when it’s time to remortgage.’

Euro (EUR) Supported by Hawkish ECB amidst Ukraine Fears

The Euro (EUR) enjoyed relative success against its peers on Thursday despite the escalating situation in Ukraine. Hawkish comments from the European Central Bank (ECB) helped support the Euro.

ECB Executive Board Member Isabel Schnabel reiterated the central bank’s commitment to continually raising interest rates, to provide support to the European economy, and the Euro. With inflation still high, and far above the target rate, a recession is not something Schnabel admitted for the Eurozone, but one that could be unavoidable for Germany. She added:


‘A looming downturn would have a dampening effect on inflation. However, the starting point of interest rates is very low, so it is clear that we need to continue raising rates.’

Meanwhile, the Ukraine invasion continues to dampen spirits barely a week after Ukrainian forces launched a series of successful counter-offensive measures. Putin’s national address on Wednesday, where he announced partial mobilisation of troops, has irked world leaders, and has now prompted the EU in preparing new sanctions on Russia.

However, the escalating threat of further military action could be keeping a lid on the Euro. Dmitry Medvedev, former Russian president, and current deputy chairman of the Security Council of Russia has added fuel to the fire and threatened the West. He said in a statement on Telegram:

‘Therefore, various retired idiots with generals’ stripes do not need to scare us with talk about a Nato strike on Crimea. Hypersonic is guaranteed to be able to reach targets in Europe and the United States much faster.

‘But the Western establishment, in general, all citizens of the NATO countries need to understand that Russia has chosen its own path. There is no way back.’

GBP/EUR Exchange Rate Forecast: BoE Interest Rate Decision to Boost the Pound?

Looking ahead, all eyes will be on the interest rate decision by the BoE. An expected 50bps rate hike would mark the seventh consecutive raise, but a move either side could see the Pound sink or soar, respectively.


Meanwhile, any further news out of Ukraine could weigh on the European economy, and the Euro.

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TAGS: Pound Euro Forecasts