Pound Euro Exchange Rate Dented by ECB Kazak Comments
The Pound Euro (GBP/EUR) exchange rate is ticking lower this morning, following comments from a European Central Bank (ECB) policymaker, playing down the potential for more stimulus from the bank.
At the time of writing the Pound Euro exchange rate is trading at around €1.1729, down from a high of €1.1750 struck earlier in the session.
Euro (EUR) Buoyed as ECB Unlikely to Bolster Stimulus in Response to Omicron
The Euro (EUR) is edging higher this morning, following comments from ECB Governing Council member Martins Kazaks. In which he indicated that Omicron would need to do significant damage to the Eurozone economy before the ECB would consider ramping up its stimulus programme again.
The ECB’s Pandemic emergency purchase programme (PEPP) is currently expected to wrap up in March.
Speaking to Bloomberg, Kazaks said:
‘At the current moment, we don’t know how the omicron variant will develop. Unless it spills over into significant and large negative revisions to the outlook for growth, I don’t see that March — which the market has been expecting for some time and which we’ve been communicating in the past — should be changed.
The comments will bolster hopes the ECB might be more open to starting to discuss the potential hiking of interest rates to tackle surging inflation in the Eurozone, as the bank would likely to be less willing to consider such action in the event that its stimulus programme is expanded.
Pound (GBP) Muted amid Ongoing Brexit Uncertainty
At the same time, the Pound (GBP) is stuck in a narrow range this morning amidst ongoing concerns over Brexit, as the UK-EU talks regarding the Northern Ireland protocol continue to drag on.
GBP investors are reluctant to place any aggressive bets on the Pound as the two sides remain at an impasse.
Recent reports suggests that the UK’s stance is softening, with the government walking back its threat to activate Article 16 of the protocol, in additional to reportedly taking steps to cool tensions with France in the row about historic fishing rights.
However until the Northern Ireland issue is resolved there remains the chance of Article 16 being triggered, an outcome which could result in a UK-EU trade war.
Pound Euro Exchange Rate Forecast: Slowing GDP to Soften Sterling?
Looking ahead to the second half of the week, the primary catalyst the Pound Euro (GBP/EUR) exchange rate looks to be the publication of the UK’s latest GDP release.
October’s figures are forecast to report the UK economy slowed at the start of the fourth quarter, with domestic growth predicted to have slipped from 0.6% to 0.4% on a month-on-month basis.
While the weakening of growth will come as little surprise to GBP investors given the supply chain constrains and petrol shortages which dominated headlines in October, confirmation of the slowdown is likely to sap Sterling sentiment.
Meanwhile, the publication of Germany’s latest trade figures may be closely watched by EUR investors, with an expected rebound in export growth potentially offering some support for the Euro.