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Pound Hits 1-Week High Versus Euro, as Bank of England May Be Upbeat

Market CommentaryPound Hits 1-Week High Versus Euro, as Bank of England May Be Upbeat
Pound Hits 1-Week High Versus Euro, as Bank of England May Be Upbeat
Image credit: Miroslav Sárička

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

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

Sterling bounces back versus the common currency! The pound to euro interbank exchange rate has hit its highest in 1 week today, or since May 1st, at 1.1388.

The pound has risen, because financial markets are hopeful that the Bank of England will be upbeat about the UK's economic outlook, at its interest rate decision this Thursday 10th May.

Sterling has jumped, because even though it's thought that the BoE will keep UK interest rates at just 0.5% this week, the central bank may signal rate hikes for later this year.

For instance, the Bank of England may put "emphasis on a strong labour market and healthy wage growth" in the UK, says Ned Rumpeltin at Toronto-Dominion Bank, thus lifting sterling.

Also, even if the central bank holds interest rates this week, several members of the 9-person Monetary Policy Committee (MPC) may vote to lift rates, thereby boosting the pound too.

This has strengthened sterling, because when the Bank of England lifts interest rates, this makes investing in UK-denominated assets more profitable for international money managers!

Euro falls, as Eurozone economy weakens further

What's more, the pound has also hit this 1-week high against the euro, because the Eurozone economy has weakened further, according to closely-watched data this week.

The euro has lost out, first because German factory orders fell by -0.9% in March, said the Deutsche Bundesbank on Monday, far beneath financial market forecasts for +0.5%.

The common currency has also dropped, as Eurozone investor confidence has sunk to 19.2, said Sentix yesterday, disappointing predictions for 21.1, and April's figure of 19.6.

This has dragged down the euro, in particular because this is the 4th consecutive month that investor confidence in Europe has fallen, and the lowest result since February 2017.

"The euro area economy has hit a soft patch and inflation has disappointed," says Daniel Been at ANZ, thereby weighing on the Eurozone's common currency too.

As a result, the pound to euro interbank exchange rate has hit this 1-week high, and may rise higher!

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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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