EURGBP Jumps on BoE Taper, Scottish Count Begins

The EURGBP rate was higher on Thursday after the Bank of England cut its weekly QE programme by £1bn per week. Interest rates are projected to stay at 0.10% into 2023 and traders will now focus on the Scottish elections, with the vote count starting at 9am.

The EUR to GBP is trading within the range of April’s yearly low and the March highs at 0.8642.

Bank of England tapers QE programme

The Bank of England kept interest rates on hold at 0.10% in their latest monetary policy announcement. The bank also announced a cut to its bond buying programme with the bank adjusting its weekly commitments from £4.4bn to £3.4bn.

The BoE stressed that the move to reduce its weekly purchases should “not be interpreted as a change in the stance of monetary policy”. Policymakers are trying to stop markets moving too quickly with rate rise expectations and the BoE also attempted to soothe inflationary fears.

The bank said that their 2% target for inflation was still intact for the medium term, but that is another attempt to distract traders and the GBPEUR rate has likely overreacted to the news.

“Inflation is projected to rise close to the target in the near term as some of those effects fade. In the central projection, CPI inflation rises temporarily above the 2% target towards the end of 2021, owing mainly to developments in energy prices. These transitory developments should have few direct implications for inflation over the medium term, however,” the BoE statement said.

Growth forecasts for the British economy were also increased to 7.25% and the country is now expected to see its pre-virus activity levels in 2021, which would be three months ahead of the previous forecast.

Scottish election count to begin

Voting closed overnight in the Scottish Parliament elections, but an 11-hour wait was in place before the ballots were counted. Counting will start at 9am this morning, with the final result expected on Saturday.

A record number of voters had already cast their ballots before the polls opened, with more than a million having registered to vote by post. The election could determine the future path of the UK and could be crucial in whether or not Nicola Sturgeon gets another referendum on Scottish independence.

The First Minister was said to have scored a late surge in the polls which could see her taking a majority, while a stronger showing was expected for the Green party, which would further increase the support for a second referendum.

Boris Johnson has already said that talk of another independence poll was “reckless and irresponsible” at a time when the UK is bouncing back from the lockdown disaster, but the Prime Minister said, “Let’s wait and see what actually happens. I think that most people in Scotland, most people around the whole of the UK, feel that this is not the time.”

The EURGBP will target further gains above the 0.8700 level if the SNP get a favourable result. Support would come in around the 0.8600 level if sterling can rebound.

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