British Pound holds firm against Euro on stronger growth, hawkish policy signals

EUR/GBP remains under pressure after last week’s rejection from the 0.8600 mark.
BoE policymaker Catherine Mann calls for higher interest rates to bring inflation back to 2%.
Stronger Eurozone manufacturing activity offers the Euro limited support.

EUR/GBP trades on the defensive on Thursday, remaining on the back foot for the fifth consecutive day following last week’s rejection from the 0.8600 psychological mark. At the time of writing, the cross trades around 0.8537, its lowest level since mid-August.

The British Pound (GBP) strengthened across the board on Wednesday after UK second-quarter Gross Domestic Product (GDP) was revised higher to 0.5% QoQ from 0.4%, while the annual growth rate was raised to 1.4% from 1.2%. The figures showed that the UK economy remains resilient, giving the Bank of England (BoE) more room to raise interest rates to counter inflation. The BoE has kept rates unchanged this year, but markets increasingly expect it to begin tightening in the coming months as high energy costs keep price pressures elevated.

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BoE policymaker Catherine Mann said on Thursday, “Current stance is not sufficiently tight.” She added, “Can’t rely on risk premia to do the work of monetary policy, need to raise the bank rate,” and “Raising rate can ensure sustainable return to 2%.”

The Euro (EUR), meanwhile, remains weighed down by political and fiscal concerns in France. Rising government borrowing costs and uncertainty surrounding the country’s budget outlook have raised concerns about debt sustainability, limiting demand for the shared currency.

The European Central Bank (ECB) has already raised interest rates twice this year, but traders expect it to proceed more cautiously as elevated energy prices pose threats to Eurozone economic growth. ECB President Christine Lagarde said on Monday, “We see higher inflation ahead but no signs yet that it is becoming embedded,” adding that the ECB considers “a measured response as appropriate to keep inflation in check.”

However, Thursday’s manufacturing data offers the Euro some support, leaving EUR/GBP trading within a narrow range near its recent low. The Eurozone HCOB Manufacturing PMI rose to 52.9 in September from 52.7, reaching its highest level since May 2022 as new orders and production strengthened. In contrast, the UK S&P Global Manufacturing PMI eased to 51.9 from 52.0. The focus now shifts to the Eurozone’s preliminary inflation report for September on Friday.

Pound Sterling Price This week

The table below shows the percentage change of British Pound (GBP) against listed major currencies this week. British Pound was the strongest against the Australian Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.72%	0.02%	0.36%	0.76%	0.88%	0.83%	0.84%
EUR	-0.72%		-0.76%	-0.30%	0.01%	0.15%	0.10%	0.10%
GBP	-0.02%	0.76%		0.27%	0.74%	0.87%	0.83%	0.83%
JPY	-0.36%	0.30%	-0.27%		0.27%	0.44%	0.38%	0.35%
CAD	-0.76%	-0.01%	-0.74%	-0.27%		0.17%	0.07%	0.09%
AUD	-0.88%	-0.15%	-0.87%	-0.44%	-0.17%		-0.05%	-0.06%
NZD	-0.83%	-0.10%	-0.83%	-0.38%	-0.07%	0.05%		-0.01%
CHF	-0.84%	-0.10%	-0.83%	-0.35%	-0.09%	0.06%	0.00%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the British Pound from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent GBP (base)/USD (quote).