Pound Euro (GBP/EUR) Exchange Rate Firms amid Hawkish Speech from BoE Mann

February 6, 2023 - Written by John Cameron

STORY LINK Pound Euro (GBP/EUR) Exchange Rate Firms amid Hawkish Speech from BoE Mann

Pound Euro (GBP/EUR) Exchange Rate Firms amid Hawkish Speech from BoE Mann

The Pound Euro (GBP/EUR) exchange rate firmed on Monday morning, following a hawkish speech from Bank of England (BoE) Policymaker Catherine Mann. Mann stated that further rate hikes were likely, lending support to GBP.

At the time of writing, GBP/EUR traded at around €1.1191, a rise of roughly 0.2% from Monday’s opening rates.

Pound (GBP) Bolstered by Hawkish Speech from BoE Mann

Following on from last week’s crash, the Pound (GBP) edged higher on Monday morning, following a decidedly hawkish speech from BoE policymaker Catherine Mann.

While Mann is a notably hawkish member of the Monetary Policy Committee, her speech still appeared to bring some cheer to GBP investors.

She stated: ‘Uncertainty around turning points should not motivate a wait-and-see approach, as the consequences of under tightening far outweigh, in my opinion, the alternative. We need to stay the course, and in my view the next step in Bank Rate is still more likely to be another hike than a cut or hold.’

She further reiterated that she didn’t believe that headline inflation in the UK was at the turning point towards returning to 2%.

As such, Mann’s speech appeared to go some way in alleviating domestic pressures. Nurses and ambulance staff across the UK have begun a mass walkout, marking another milestone in the continuing industrial action across the UK.

Because of this, Sterling appeared to lack firm appeal to investors, meaning that GBP was unable to capitalise on the promise of further interest rate hikes.

Euro (EUR) Muted amid Poor Retail Data

The Euro (EUR) saw muted trade on Monday morning, following the release of the latest retail sales data for the Eurozone.

While a fall was forecast from 1.2% to -2.5%, the monthly data came in below forecast and printed at -2.7%. As such, this amplified investor concerns that inflation and interest rate hikes were beginning to have a negative impact on consumer spending across the bloc.

Elsewhere, Germany’s construction PMI remained in contractionary territory, though posted an above-forecast increase to 43.3.

Phil Smith, Economics Associate Director at S&P Global Market Intelligence, commented: ‘The rates of decline in activity and new orders eased somewhat in January, coinciding with reduced pessimism among businesses towards the outlook, but each of these indicators remained deep in sub-50 territory to suggest further weakness in the coming months.’

Pound Euro (GBP/EUR) Exchange Rate Forecast: BoE Policymaker Speeches in Focus

Looking ahead for the Pound (GBP), Tuesday sees a trio of Bank of England policymakers scheduled to deliver speeches.

With the BoE recently taking a dovish stance towards further interest rate hikes, investors may be keeping a close eye on the speeches from Ramsden, Pill and Cunliffe for any indication over future monetary policy. With Chief Economist Huw Pill being the key figure in this triptych, if he continues to warn of doing ‘too much’ with rate hikes, GBP could fall.

Elsewhere, thin trading conditions are abound for Sterling. Because of this, investor focus could shift to domestic headlines. With industrial action continuing across the UK, any further headlines could cap Sterling’s gains.

For the Euro, Tuesday sees the release of December’s German industrial production data. A monthly decline to -0.7% from 0.2% is forecast, which could weigh on the Euro. With the bloc’s largest economy beginning to slow and contract, the fall in production could prove to be a worrying sign for EUR investors.

Similarly to the Pound, thin trading conditions are expected beyond the German data. As such, shifts in market sentiment could drive the Euro. A shift further towards risk averse trade could bring safe haven flows to the single currency.

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