GBP / EUR: Pound advances ahead of BoE

GBP / USD: BoE reject request for pound
  • Pound (GBP) bolstered by Brexit optimism. But no agreement was reached
  • The BoE intended to hold back rates.
  • Euro (EUR) raised by USD weakness, stronger data
  • Focus Eurozone CPI

The Euro Pound exchange rate (GBP / EUR) extended gains on Thursday. The pair settled flat on Wednesday at € 1.1071, after rising to € 1.1119 earlier in the session. At 05:15 UTC, GBP / EUR trades + 0.2% at € 1.1089.

Brexit hopes back the Pot with the latest reports showing that some progress has been made. However, an agreement remains to be agreed with fishing as the main obstacle.

UK annual inflation for November was deficient at 0.3%, down from 0.7% in October and very short of the expected 0.6%. Core inflation also fell short of estimates at 1.1%

Attention will now turn to the forthcoming publication of the Bank of England’s monetary policy later today. The news comes against a backdrop of Brexit uncertainty and the tightening of covid’s restrictions. After expanding their QE program by £ 150 billion in November and expanding it to the end of 2021, the central bank is not expected to operate today. Early next year the central bank will have more clarity on the covid vaccine distribution forecast and how Brexit is shaping up.

The BoE could provide guidance on what steps to take if the economy goes down at the start of the year with Brexit and tighter restrictions.

The Euro traded strongly in the previous session, backed by a weaker dollar again and by upeat data from the region. Manufacturing and service sector PMIs showed that the block’s economic performance was much higher than expected in December despite renewed lockout restrictions in several countries.

The combined PMI which is considered a good guide of economic health rose to 49.8 this month, up from 45.3 in November. This was just short of the 50 level that separates expansion from shortening.

Looking ahead there will be a focus on Eurozone inflation, as measured by the consumer price index. Disinfection is expected to be -0.3% month-on-month in November to be confirmed.