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Pound Euro Exchange Rate Falls as Bank of England Shocks Markets With Surprisingly Dovish Statement

Published: 24 Jun at 5 PM Tags: Pound Sterling, Euro Exchange Rate, Currency Exchange, Euro Crisis, UK, Exchange Rates, Economy, Inflation, France, Pound Euro Exchaneg Rate,

The Pound Euro exchange rate fell by -0.5% today after the Bank of England (BoE) released a surprisingly dovish statement about UK growth and inflation, which it said would likely be ‘temporary’. The pairing is currently fluctuating around €1.16.

Sterling struggled today after the BoE predicted that inflation is likely to rise above 3% as the UK’s economy continues to gather pace.

However, the Bank also said that the spike in inflation was likely ‘transitory’.

Members of the Monetary Policy Committee (MPC) concluded:

‘The economy will experience a temporary period of strong GDP growth and above target inflation after which growth and inflation will fall back.’

Added to this, rising Covid-19 cases throughout the UK have sparked concerns that the final lifting of lockdown restrictions – due to go ahead on July 19 – could be delayed.

As a result, GBP investors are concerned that the Delta variant of the coronavirus could further jeopardise the nation’s economic recovery.

Meanwhile, the Euro (EUR) has benefited from strong French and German consumer confidence figures for June.

GfK, the company which compiled the data, commented:

‘The drop in coronavirus cases and further progress with vaccinations is helping to open the door to more easing steps in the coming weeks. At the moment, this is mainly fuelling economic optimism and creating a sense of new beginnings.’

With the outlook for the Eurozone’s economy looking increasingly promising, demand for the single currency has risen.

Looking ahead, we could see the Pound (GBP) fall if Covid-19 infections continue to rise throughout England.

Consequently, UK markets would become increasingly pessimistic about the planned lifting of UK restrictions next month.

UK consumer confidence data, due out on Friday, will also provide further insight into the state of the British economy.

Could the Pound (GBP) rise if consumer morale points to a promising outlook for the UK economy in the months ahead?