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Euro Nears 2-Month High Versus Pound, as BoE Cuts UK Growth Outlook

Market CommentaryEuro Nears 2-Month High Versus Pound, as BoE Cuts UK Growth Outlook
Euro Nears 2-Month High Versus Pound, as BoE Cuts UK Growth Outlook
Image credit: Stosic Marko

Welcome to Pure FX's latest update of the euro to pound interbank exchange rate.

This tells you when it's a favourable time to exchange euros to pounds, for your money transfer!

The common currency rises versus sterling! The euro to pound interbank exchange rate has hit 0.8830 today, very close to its highest in 2 months, or since March 13th.

The euro has risen against the pound, because yesterday the Bank of England (BoE) held UK interest rates steady, while cutting its forecast for UK economic growth and inflation.

Sterling has dropped, as the BoE kept interest rates at 0.5% on Thursday, as widely forecast, yet eased its UK GDP growth forecast for this year by -0.4%, to just 1.4%.

In particular, the Old Lady of Threadneedle Street, as the BoE is often called, cut its UK growth outlook for 2018, as UK GDP expanded by just +0.1% in Q1, thus weakening the pound.

Also, the UK's central bank revised down its prediction for UK inflation between April and June by -0.3%, to just 2.4%, closer to the BoE's 2.0% target, thereby weighing on sterling too.

This has pulled down the pound, because when UK inflation falls, this puts less pressure on the Bank of England to hike UK interest rates, in turn cutting profitability for investing in Blighty!

Pound falls, as UK manufacturing production drops

Furthermore, the euro to pound interbank exchange rate has also neared this 1-month high, because UK manufacturing production dipped in March, said official statistics yesterday.

Sterling has lost out, because UK manufacturing production fell by -0.1% at the end of Q1, said the Office for National Statistics (ONS) on Thursday, following February’s -0.2% slide.

This has dragged down the pound, as this was the 2nd consecutive monthly fall in UK manufacturing production, driven by weaker electrical equipment and pharmaceutical production.

What's more, sterling has also sprung a leak, because the UK's total trade deficit widened to -£3.091 billion in March, said the ONS yesterday, from just -£1.176 billion in February.

This has weighed on the pound, because when the UK's trade deficit expands, this cuts the odds that net trade will contribute positively to the UK's economic growth.

As a result, the euro to pound interbank exchange rate has hit this 2-month high, and may rise further!

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Please bear in mind, this article is Pure FX’s opinion only and does not constitute advice. Moreover, the exchange rates referred to in this article are the interbank rates, which are the rates at which banks and financial institutions buy and sell currency to each other. Therefore these exchange rates cannot be accessed by individuals or SMEs, and are not the same rates that Pure FX can offer. To get a free exchange rate quote, call us on +44 (0) 1494 671800, or email peter.lavelle@purefx.co.uk.

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