Pound-Euro Upside Limited by Growing Expectations for a 2022 Rate Hike at the ECB

GBP/EUR supported at 1.17, may see new highs if BoE’s inflation stance continues to inspire GBP.

The Pound-to-Euro rate drew bargain hunters when month-end market turbulence pushed it briefly below 1.16 last week, but over the coming days it could set the stage for new 2021 highs to be achieved toward year-end aided by Sterling's undervaluation and the increasingly supportive outlook for Bank of England interest rates.

Gas prices have fallen sharply since Russian President Vladimir Putin said Russia would significantly boost the supply of gas to the European market, a move that has settled foreign exchange markets.

The Pound-to-Euro exchange rate fell back below 1.16 at the start of the new month amidst a souring in global investor sentiment.

GBP/EUR closed at its highest level since mid-August, lifted by an ongoing outperformance in UK bond yields as investors anticipate higher interest rates at the Bank of England.

Technical observations of the GBP/EUR exchange rate suggests the outlook has now flipped from advocating further gains and is pointed lower, although some final confirmation is required.