The GBP/EUR exchange rate remained stable at €1.1502 on Thursday, as investors awaited the Bank of England’s (BoE) decision on interest rates amidst deteriorating economic conditions in the UK. This comes in the wake of October’s manufacturing PMI data, which showed a significant contraction in UK factory activity, fueling fears of a recession. S&P Global Market Intelligence attributed this contraction to market uncertainty and the ongoing cost-of-living crisis, both of which have negatively impacted consumer demand.

On the other hand, the euro weakened due to a lack of data on All Saints’ Day and a 0.1% drop in the eurozone’s GDP for Q3. This signals an economic slowdown but not necessarily a sharp recession, according to analysts from ING. Furthermore, German employment data indicating an increase in joblessness could put additional downward pressure on the euro. Statements from European Central Bank (ECB) officials are also expected to influence EUR movements.

The BoE’s decision on interest rates is anticipated to remain at 5.25%. While this could impact the GBP, inflation concerns from the BoE might also pique investor interest.

Simultaneously, the GBP/USD exchange rate held firm at $1.2190 on Thursday. The pound is slightly weaker due to uncertainties surrounding the economic outlook, fears of a recession, and persistent inflation. Barclays expects a hawkish stance from the BoE, despite potential adjustments to short-term growth and inflation forecasts. This strategy is intended to prevent premature easing of financial conditions and leave room for future hikes if necessary, mitigating the risk of pushing the UK into a recession.

Meanwhile, the USD remains stable after the Federal Reserve’s decision to extend its pause on tightening and maintain rates between 5.25% to 5.5%. Despite indications from the Fed of a potential future rate hike, investors remain skeptical.