EUR GBP Soars After BoE Interest Rate Flop

The EUR GBP exchange rate was sharply higher after the Bank of England failed to lift interest rates. The euro was higher by over 0.60% against the pound sterling after the bank’s decision to pull back on a November rate hike. There was no talk of a move by the end of the year and the BoE also held its stimulus in place.

The EUR v GBP is trading at 0.8540 after the BoE announcement.

Bank of England shocks market with no interest rate hike

The Bank of England crushed the pound sterling with a decision to hold steady on interest rates.

Previous comments from the bank’s governor had seen a sharp move in bond markets predicting a November rate hike. Despite raising its inflation target to 5% the bank voted 7-2 to stay at the 0.1% level.

The bank’s bond buying program will also remain unchanged into year-end.

The central bank commented: “the Committee judges that, provided the incoming data, particularly on the labor market, are broadly in line with the central projections in the November Monetary Policy Report, it will be necessary over coming months to increase Bank Rate in order to return CPI inflation sustainably to the 2% target. There was value in waiting for additional information on near-term developments in the labor market.”

The move will upset some in the city who see inflationary pressures rising but it will please mortgage owners. It’s likely that the bank had other issues on its mind such as the recent tax hikes and budget, while a November hike would impact on pre-Christmas retail sales as shoppers tighten the purse strings.

A rate hike is still a near certainty in either December or early-2022 and the failure to act no could cost the bank if inflation picks up further.

European PMI figures mixed but remain expansionary

There were mixed results for European economies in the latest PMI manufacturing figures.

Better figures for Germany, Eurozone and the UK were met with weaker numbers from France. In the services sector, the UK and France fared well, while Italy, Germany and the eurozone were weaker.

Overall composite PMI figures were flat for Germany and Europe were still above the expansionary 50 level. Supply chain bottlenecks and price input inflation are seen as the drag.

In the UK, Retail footfall across the UK was higher by 11% in the last week of October, compared with the week before, and the largest increase since May.

The British half-term boosted results, but vacancy rates were largely unchanged at 11.7%. “This is despite the growth of pop-up stores which are a typical feature of retail destinations in the run-up to Christmas, but which should be even more prevalent now given the greater availability of empty space,” Springboard Marketing & Insights Director Diane Wehrle commented.

The EUR v GBP has resistance at the 0.8650 level where prices were capped back in September of this year.

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