The GBP/EUR exchange rate remained steady at €1.1502 on Thursday as investors awaited the Bank of England‘s (BoE) decision on interest rates amid deteriorating economic conditions in the UK. This comes in the wake of October’s manufacturing PMI data, which showed a significant contraction in UK factory activity, fueling fears of a recession. S&P Global Market Intelligence attributed the contraction to market uncertainty and the ongoing cost of living crisis, both of which have negatively impacted consumer demand.
On the other hand, the Euro weakened due to a lack of data on All Saints Day and a 0.1% decline in Eurozone GDP for Q3. This signals an economic slowdown, but not necessarily a sharp recession, according to analysts at ING. In addition, German employment data indicating an increase in unemployment could put additional downward pressure on the Euro. Statements from European Central Bank (ECB) officials are also expected to influence EUR movements.
The BoE‘s decision on interest rates is expected to remain at 5.25%. While this may have an impact on the GBP, the BoE’s inflationary concerns may also spark investor interest.
Meanwhile, the GBP/USD exchange rate held steady at $1.2190 on Thursday. The Pound is slightly weaker due to uncertainties surrounding the economic outlook, fears of a recession, and persistent inflation. Barclays expects a hawkish stance from the BoE, despite possible revisions to near-term growth and inflation forecasts. This strategy is aimed at preventing a premature easing of financial conditions and leaving room for future hikes if necessary, thus reducing the risk of pushing the UK into a recession.
Meanwhile, the USD remains stable following the Federal Reserve’s decision to extend its tightening pause and keep interest rates between 5.25% and 5.5%. Despite the Fed‘s hints of a possible future rate hike, investors remain skeptical.
