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Cautious BoE Capping Sterling Upside

Cautious BoE Capping Sterling Upside

The Pound to Euro exchange rate was dealt a setback last week as a cautious Bank of England set the tone on outlook and reiterated their stance on limited interest rates with the UK currency looking to stabilise nearby the 1.18 level over the coming days.

With a question mark placed over the outlook for interest rates in the months due to surging energy prices and increasing levels of inflation, the squeeze on incomes could ultimately serve as a substitute for increases in Bank Rate during the period ahead.

In level terms, sterling still experiencing some volatility following Thursday’s BoE meeting is reflected this morning in GBP/EUR moving up from 1.1830 to a high of 1.1935, before settling back down to open this morning just below the 1.19 mark. The EUR/USD had moved twice within the 1.11 region but was unable to stand firm to open just above the 1.1050. Similarly, Cable (GBP/USD) is also circa 1% higher, with the pair starting this week close to the halfway point of the 1.31- 1.32 band. 

Datawise, this week, we get the first batch of key survey data for March that will be assessed for any impact on business sentiment from the war in Ukraine. US, Eurozone and UK PMI are expected to edge back versus their February levels with markets likely to continue to keep a close watch and remain sensitive to Ukraine related newsflow.

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