EUR/GBP Dips After BoE Holds Rates, Pound Strengthens
- Speculation of rate cut weakened Pound
- Euro supported by hawkish commentary and Current Account surplus
EUR/GBP is currently trading lower in the 0.8390s after a decline following the Bank of England’s decision to maintain interest rates unchanged. The Pound Sterling has strengthened against the Euro, leading to the dip in the currency pair.
Reasons for the Decline in EUR/GBP:
- The BoE voted to keep interest rates at 5.00%, with only one member advocating for a rate cut. This decision boosted the Pound.
- The BoE announced a reduction in its stock of gilts, which is expected to lead to a fall in gilt prices but a rise in yields, supporting the Pound.
Factors Supporting the Euro:
- Hawkish commentary from ECB executive board member Isabel Schnabel, indicating no aggressive rate cuts due to high inflation.
- Data showing an increase in the Eurozone’s Current Account surplus, reflecting foreign demand for the Euro.
Despite these factors, EUR/GBP fell after core UK inflation data surpassed expectations, while Eurozone inflation was revised down. Higher UK inflation supported the Pound, indicating sustained higher interest rates.
Key Data Points:
- UK core CPI rose by 3.6% YoY in August, above expectations and the previous month.
- Eurozone’s HICP was revised down to 0.1% MoM in August, lower than the initial estimate of 0.2%.
Overall, the dynamics between the Bank of England’s decision, inflation data, and central bank commentary have influenced the movements in the EUR/GBP pair.