Noticias de la Cámara

GBP/EUR strikes three-month low in volatile trade

08/05/2024 currenciessdirects1

The pound euro exchange rate traded in a wide range through April, with the pairing briefly striking a three-month low before swiftly rebounding.

What happened last month?

The pound got off to a positive start in April as an upbeat market mood helped underpin the increasingly risk-sensitive currency.

Hotter-than-forecast UK inflation gave Sterling another lift in mid-April, but the upside proved short-lived.

Bank of England Governor Andrew Bailey and Deputy Governor Dave Ramsden brushed off the uptick in inflation, saying they expected price pressures to ease notably in April.

Investors subsequently began betting that the BoE will start its rate-cutting cycle in August, rather than September, while some analysts expect an even earlier cut. This triggered a sharp slump in GBP, which led it to strike a three-month low against EUR.

However, more hawkish remarks from BoE Chief Economist Huw Pill and a strong services PMI for April helped the pound claw back some losses towards the end of the month.

As for the euro, the common currency weakened in the first half of April after the European Central Bank (ECB) used its latest policy decision to pave the way for a rate cut in June.

Signs that the Eurozone economy is recovering helped support EUR exchange rates as the month progressed, however.

The Eurozone’s services PMI revealed that activity had accelerated at its fastest pace in 11 months, while the bloc’s economy returned to growth in the first quarter of 2024, with GDP beating forecasts.

GBP/EUR forecast

Looking ahead, the BoE meets in the second week of May where it is widely expected to leave interest rates unchanged. If the bank strikes a dovish chord with its forward guidance, we could see Sterling stumble. 

The middle of May will also see the publication of the UK’s latest GDP figures, which will confirm whether or not the UK economy came out of recession at the start of 2024. A solid rebound in growth could help propel the pound higher.

Meanwhile, the euro is likely to face pressure if the Eurozone’s CPI reading for May cements bets on an ECB rate cut in June.

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