EUR/GBP consolidates during late US session

As the Bank of England’s hawkish stance became increasingly apparent, the EUR/GBP pair advanced. The US dollar’s decline gave the GBP a lift, and the Euro gave way to the Pound Sterling as long-term stagnation in the Eurozone looked certain.


The EUR/GBP pair is now up 0.12% for the day and has so far fluctuated between a low of 0.8532 and a high of 0.8584. The pair is now trading at 0.8551 as of the time of writing. However, this is not an accurate reflection of the pound’s strength. Governor of the Bank of England Andrew Bailey stated on Monday that the British central bank needed to “see the job through” in order to reduce an inflation rate that is higher than it was in the previous year.


The pound consequently took off among a bout of US dollar selling as Federal Reserve officials pointed to an end of the tightening cycle at some stage in the future. According to Reuters, BoE governor Bailey claimed that price growth had proven to be more persistent than the BoE had anticipated under criticism from lawmakers and some experts about the sharp increase in inflation.


In the text of a speech he was scheduled to give later on Monday to finance executives at London’s Mansion House, Bailey said, “It is important that we finish the job, fulfil our mandate to return inflation to its 2% target, and provide the environment of price stability in which the UK economy can thrive.”


Bailey’s remarks generally confirmed earlier ones that had investors believing that there will be additional interest rate increases. ‘On Monday, interest rate futures indicated that the bank rate will peak between 6.25% and 6.5% in early 2024, which would be the highest level in 25 years and an increase from the current 5%.

It’s important to note that despite a slight decline, GBP net speculators’ positions are still at their highest point since 2014. Key wage and growth statistics will be released this week, but the current trend of good UK labour statistics and persistent CPI inflation strengthens the case for more rate hikes.

According to the economic calendar, news from Europe on a slow start to the week reveals that the Sentix investor confidence declined by 5.5 points to -22.5 in July, worse than market estimates. ‘The components measuring existing circumstances and expectations also declined, indicating that early-year signs of recovery may have been a fluke. Although ECB officials continue to make pessimistic remarks, future rate increases are already expected.