Pound Euro Exchange Rate News: GBP/EUR Climbs amid Sweeping Reforms to UK Financial Sector

December 9, 2022 - Written by John Cameron

STORY LINK Pound Euro Exchange Rate News: GBP/EUR Climbs amid Sweeping Reforms to UK Financial Sector

Pound (GBP) Buoyed amid the Proposed Loosening of Financial Rules

The Pound (GBP) enjoyed modest success against most of its peers on Friday amid interest rate hike expectations for next week. The Bank of England (BoE) is expected to raise interest rates by 50bps at the next policy meeting, as inflation remains far above the central bank’s target of 2%. Meanwhile, Chancellor Jeremy Hunt announced his 30-point plan on reforms for the financial sector.

Originally outlined in his autumn statement, Hunt has promised that without the burdens of European Union regulations, London will prosper. Originally intended to protect the UK from further financial crises after 2008, the reforms and repeals of such regulations are hoping to boost the appeal of the City to outside investors. Hunt added:

‘We are committed to securing the UK’s status as one of the most open, dynamic and competitive financial services hubs in the world. The Edinburgh Reforms seize on our Brexit freedoms to deliver an agile and homegrown regulatory regime that works in the interest of British people and our businesses.’

Elsewhere, the Bank of England (BoE) released their consumer inflation expectations survey to mixed reception. Long-term inflation expectations softened whereas medium-term inched higher. As inflation in the UK hit a 41-year high of 11.1% in October, five times the central bank’s target, the public’s perception remains muted. Philip Shaw, Investec economist, remained confident of another half percent rise:

‘To our minds, another 50-basis point increase looks likely. The BoE has made it pretty clear that inflation is too high. It’s concerned about the tightness of the labour market.’

Euro (EUR) Undermined Despite Upbeat Risk Appetite

Meanwhile, the Euro (EUR) struggled to find much demand on Friday despite risk sentiment modestly improving. Improved expectations of a 50bps rate hike in line with the BoE’s failed to buoy the Euro.


With bets of a bolder 75bps dissipating after further evidence of a cooling Eurozone inflation, many investors have since pared those bets. A downgrade in interest rate hikes could be having an adverse effect on the Euro. Carsten Brzeski, Global Head of Macro at ING said of the situation:

‘Whether they like it or not, the worsening economic backdrop has brought many central bankers closer to the moment of slowing tightening efforts, and eventually even pausing rate hikes.’

GBP/EUR Exchange Rate Forecast: Economic Rebound to Boost Sterling?

Looking ahead to next week’s session, the Pound Euro exchange rate could be in for turbulent movement amid the release of key economic data. GDP growth data kicks the week off for the Pound, an expected climb could bolster Sterling.

Meanwhile, the Euro could encounter pressure with a predicted downturn of economic sentiment on Tuesday. In the meantime, the negative correlation the Euro shares with the US Dollar could weigh heavily if Federal Reserve rate hike expectations grow.

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TAGS: Pound Euro Forecasts