The euro traded lower against the pound on Tuesday as traders focused on a possible Bank of England rate increase and upcoming data that could shape expectations for the two economies.
FXStreet reported EUR/GBP at 0.8336, down 0.11%, at 7:29 a.m. ET (12:29 UTC) Tuesday. Live-Rates showed 0.83361, also down 0.11%, at 7:27:21 a.m. ET (12:27:21 UTC). EUR/GBP shows how many pounds one euro buys; a daily decline means the euro weakened against sterling over the period measured.
The Bank of England is scheduled to announce its next policy decision Nov. 5, and its Bank Rate is 3.75%. Reuters reported that economists it polled expect an increase to 4%, but no decision has been announced.
At its September meeting, the Monetary Policy Committee voted 6-3 to hold at 3.75%. Six members backed no change, while three preferred a quarter-point increase to 4%, according to the Bank of England’s minutes.
The ECB’s deposit facility rate has been 2.50% since Sept. 16. The current gap between the BoE and ECB rates is 1.25 percentage points; a rise to 4% would widen it to 1.5 points, based on the cited rates. Rate differences can affect currency demand, though the Reuters poll does not confirm what the Bank of England will do.
S&P Global’s calendar lists final October Services and Composite PMI readings for the eurozone and U.K. on Wednesday, Nov. 4. Eurostat’s latest published annual inflation rate for the euro area was 3.8% in September, up from 3.2% in August.
Alexander Harvey, UK economist at Oxford Economics, told Reuters he did not expect the committee to indicate how many further rate increases it might make.
EconoTimes previously reported a 0.14% decline in the pair after the ECB held rates steady in October, in its coverage of the euro-pound move.
The final eurozone and U.K. PMI readings are scheduled for Nov. 4, ahead of the Bank of England’s policy announcement Nov. 5.
