GBP/EUR Bounces Back on Rising Oil Prices and Higher Bond Yields
The pound-to-euro exchange rate saw a late-day rebound on Thursday, largely reversing the losses suffered in the wake of the Bank of England's interest rate decision. The pair moved up to 1.1657, having touched as low as 1.1615 earlier in the day.
The recovery is attributed to rising oil prices, which have been driving bond yields higher globally. The UK two-year bond yield has seen a steady rise throughout London PM trade, with a positive correlation observed between the pound-to-euro exchange rate and the UK two-year bond yield.
Oil prices are on the move again due to fresh headlines about Saudi oil supplies being suspended from next week, following Houthi attacks on Saudi oil pipelines. The market believes Europe is more prone to higher oil and gas prices than Britain, as evidenced by the GBP/EUR's tendency to rise alongside oil prices since the Middle East conflict began.