The Pound Sterling to Euro (GBP/EUR) exchange rate advanced by around 0.72% on Wednesday afternoon.
After Bank of England (BoE) minutes showed policymakers anticipate economic slack eroding completely in a year, the Pound strengthened across the board. This is despite the fact that all nine policymakers voted in favour of holding the benchmark interest rate.
The Euro, meanwhile, slumped in response to ongoing geopolitical tensions in Greece. With the Hellenic nation rapidly running out of cash, the need to unlock bailout funds promptly is significant.
The Pound Sterling to Euro (GBP/EUR) exchange rate is currently trending in the region of 1.4017.
Pound Sterling (GBP) Exchange Rate Forecast to Strengthen versus the US Dollar ahead of FOMC Minutes
As traders await the Federal Open Market Committee (FOMC) minutes, due for publication later on Wednesday, the Pound strengthened against its US counterpart.
The main reason for the Sterling upswing was minutes from the most recent BoE policy meeting. Although all policymakers voted in favour of holding the record-low cash rate, there were some hawkish elements. The minutes indicated that policymakers expected slack in the UK to dissipate within a year. This would mean inflation will rise and policymakers will have to introduce tighter monetary policy.
Consumer-price growth will probably ‘pick up notably towards the end of the year,’ the minutes said. The level of slack was about 0.5 percent of GDP and ‘likely to be fully absorbed within a year.’
The Pound Sterling to Euro (GBP/EUR) exchange rate has fallen to a low of 1.3912 today.
Euro (EUR) Exchange Rate Forecast to Soften versus the Pound as Greek Woes Dominate Trader Focus
On Wednesday, Greek officials stated that they are running out of cash very quickly and have no chance of paying the International Monetary Fund (IMF) the loan payment due in June. Unless they can unlock critical bailout funds, the cash-strapped nation will have to seek aid outside of the Eurozone; prompting many to speculate that Greece will exit the currency bloc.
‘No country can repay its debts with only the money from its budget,’ government spokesman Nikos Filis told Ant1 television. ‘We don’t have it to repay it, and it’s a subject of the discussions.’
Additional pressure was added amid speculation that the European Central Bank (ECB) is flirting with the idea of pulling out on Greek aid. ‘It’s very simple: the ECB doesn’t want to be the one that pulls the plug on Greece when political negotiations are still ongoing,’ said Marco Valli, an economist at UniCredit SpA in Milan. ‘As long as there is the chance that Greece will remain solvent, that it might receive further European Union aid, then ELA can be given. Should this possibility disappear, then it will have to stop.’
Pound Sterling to Euro (GBP/EUR) Exchange Rate Forecast to Hold Gains amid Greek Geopolitics
Until more is known as to the progress made by Greece in its talks with the Eurogroup, the Pound Sterling to Euro (GBP/EUR) exchange rate is likely to hold gains. With that being said, however, Thursday could see GBP/EUR volatility with several data publications pertaining to both the UK and Europe due for release.
The Pound Sterling to Euro (GBP/EUR) exchange rate reached a high of 1.3998 today.
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