EUR/GBP surges towards 0.8700 as Sterling slumps on soaring UK bond yields

Pound Sterling Price Today

The table below shows the percentage change of British Pound (GBP) against listed major currencies today. British Pound was the weakest against the US Dollar.

	USD	EUR	GBP	JPY	CAD	AUD	NZD	CHF
USD		0.67%	1.26%	0.97%	0.17%	0.61%	0.78%	0.51%
EUR	-0.67%		0.56%	0.29%	-0.51%	-0.03%	0.11%	-0.16%
GBP	-1.26%	-0.56%		-0.26%	-1.07%	-0.61%	-0.46%	-0.73%
JPY	-0.97%	-0.29%	0.26%		-0.79%	-0.37%	-0.17%	-0.41%
CAD	-0.17%	0.51%	1.07%	0.79%		0.41%	0.64%	0.34%
AUD	-0.61%	0.03%	0.61%	0.37%	-0.41%		0.15%	-0.12%
NZD	-0.78%	-0.11%	0.46%	0.17%	-0.64%	-0.15%		-0.27%
CHF	-0.51%	0.16%	0.73%	0.41%	-0.34%	0.12%	0.27%

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).

UK PM Starmer stated that changes in administration is not a reset of ministry, but a transition "to the second phase" of his government.

The announcement of UK ministry reshuffle has resulted in a sharp increase in Britain’s long-term bond yields. 30-year UK gilt yields surge to near 5.68%, the highest level seen since 1998. Rising bond yields have raised fiscal concerns, underpinning the need of tax raise or big spending cuts by administration in the upcoming Autumn Budget.

Meanwhile, the Euro (EUR) gains as higher-than-projected increase in the Eurozone Harmonized Index of Consumer Prices (HICP) data for August has undermined hopes of interest rate cuts by the European Central Bank (ECB) in the policy meeting next week. The headline HICP rose at an annual pace of 2.1%, faster than estimates and the July’s reading of 2%. In the same period, the core HICP – which strips off volatile food and energy items – rose steadily by 2.3%, faster than expectations of 2.2%.

ECB board member Isabel Schnabel said during European trading hours that she doesn’t see a “reason for a further rate cut as rates are already mildly accommodative”. Schnabel guided that “inflation expectations will likely de-anchor to downside”.

Euro FAQs

What is the Euro?

The Euro is the currency for the 19 European Union countries that belong to the Eurozone. It is the second most heavily traded currency in the world behind the US Dollar. In 2022, it accounted for 31% of all foreign exchange transactions, with an average daily turnover of over $2.2 trillion a day. EUR/USD is the most heavily traded currency pair in the world, accounting for an estimated 30% off all transactions, followed by EUR/JPY (4%), EUR/GBP (3%) and EUR/AUD (2%).

What is the ECB and how does it impact the Euro?

The European Central Bank (ECB) in Frankfurt, Germany, is the reserve bank for the Eurozone. The ECB sets interest rates and manages monetary policy. The ECB’s primary mandate is to maintain price stability, which means either controlling inflation or stimulating growth. Its primary tool is the raising or lowering of interest rates. Relatively high interest rates – or the expectation of higher rates – will usually benefit the Euro and vice versa. The ECB Governing Council makes monetary policy decisions at meetings held eight times a year. Decisions are made by heads of the Eurozone national banks and six permanent members, including the President of the ECB, Christine Lagarde.

How does inflation data impact the value of the Euro?

Eurozone inflation data, measured by the Harmonized Index of Consumer Prices (HICP), is an important econometric for the Euro. If inflation rises more than expected, especially if above the ECB’s 2% target, it obliges the ECB to raise interest rates to bring it back under control. Relatively high interest rates compared to its counterparts will usually benefit the Euro, as it makes the region more attractive as a place for global investors to park their money.

How does economic data influence the value of the Euro?

Data releases gauge the health of the economy and can impact on the Euro. Indicators such as GDP, Manufacturing and Services PMIs, employment, and consumer sentiment surveys can all influence the direction of the single currency. A strong economy is good for the Euro. Not only does it attract more foreign investment but it may encourage the ECB to put up interest rates, which will directly strengthen the Euro. Otherwise, if economic data is weak, the Euro is likely to fall. Economic data for the four largest economies in the euro area (Germany, France, Italy and Spain) are especially significant, as they account for 75% of the Eurozone’s economy.

How does the Trade Balance impact the Euro?

Another significant data release for the Euro is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought after exports then its currency will gain in value purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

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