Noticias de la Cámara

GBP/EUR retreats from 18-month high

17/04/2024 bannersnikitas2

Trade in the pound euro exchange rate was erratic in February, with the pairing briefly striking an 18-month high, before ending the month broadly lower.  

What happened last month?

A dovish shift by the European Central Bank acted as a key headwind for the euro in recent weeks. With many ECB policymakers offering their thoughts on when the bank should begin cutting interest rates.

The single currency’s negative correlation with the US dollar also applied pressure to EUR exchange rates through the first half of February, amid notable USD demand.

EUR sentiment strengthened later in the month as Eurozone data began to improve, but the euro’s upside potential was kept in check amid growing fears that Germany faces a recession.

The pound traded erratically February, in response to the Bank of England’s latest interest rate decision and some uneven UK economic data releases.

While the BoE pushed back against rate cut speculation following its latest policy meeting, the bank finally dropped its pretence that its next move could be an interest rate hike.

On the data front, Sterling spiked in response to an upbeat jobs report, with GBP/EUR even being carried to an 18-month high.

However, these gains were erased almost immediately, as confirmation the UK slipped into a recession in the second half of 2023, in addition to a weaker-than-expected inflation print, stoked BoE rate cut speculation.

GBP/EUR forecast

Looking ahead, both the ECB and BoE are set to meet in March. No policy changes are expected this month, but the language used by both banks will be scrutinised by investors for any hints to when they might begin cutting interest rates. 

Likewise, upcoming UK and Eurozone data will be watched closely to see how they might influence the central banks’ thinking on monetary policy. With any signs of cooling inflation and slowing economic growth potentially stoking rate cut bets.

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