Pound Euro (GBP/EUR) exchange rate ticks following dovish ECB
The Pound Euro (GBP/EUR) exchange rate is edging higher this morning following some dovish commentary from a European Central Bank (ECB) policymaker.
At the time of writing, GBP/EUR is trading at around €1.1713, up roughly 0.2% from this morning’s opening rate.
Euro (EUR) rangebound following Stournaras commentary
The Euro (EUR) is trading sideways this morning following dovish comments made by known ECB dove, Yannis Stournaras, this morning.
Stournaras spoke on the ‘need’ to begin cutting interest rates soon, amid concerns over the central bank’s current monetary policy.
He said:
‘We need to start cutting rates soon so that our monetary policy does not become too restrictive. It is appropriate to do two rate cuts before the summer break, and four moves throughout the year seem reasonable. Insofar, I concur with the markets’ expectations. We will have only little new information before the April meeting, especially on wages at the start of 2024 — but we will get a lot more data before the June meeting.’
Both Vice President Luis De Guindos and policymaker Klaas Knot will deliver speeches later this afternoon, where they too will discuss upcoming monetary policy outlook in the Eurozone.
With the central bank recently heavily trailing a June rate cut, any further dovish commentary from the governing council members today will likely undermine the common currency moving forward.
Pound (GBP) supported by fading BoE rate cut bets
The Pound (GBP) is holding steady this morning following yesterday’s positive GDP data.
Confirmation that the UK had returned to growth at the beginning of the year reaffirmed expectations the Bank of England (BoE) will likely ‘keep interest rates higher for longer’, and alleviated fears surrounding the UK’s shallow recession in the second half of 2023.
With some economists predicting that the UK’s recession will be ‘short lived’ off the back of an increasingly positive economic outlook, this has served to bolster Sterling sentiment through to today.
Elsewhere, aiding the increasingly risk-sensitive Pound in the absence of any fresh economic data releases today is cautiously optimistic market mood.
Pound Euro exchange rate forecast: ECB speeches to continue to drive EUR movement?
Looking ahead, the primary catalyst of movement for the Pound Euro exchange rate is likely to remain centred around upcoming ECB speeches.
ECB Chief Economist Philip Laneis scheduled to speak tomorrow. Should he echo the dovish tone struck by some of colleagues, EUR may weaken into the end of this week’s session.
Turning to the Pound, macroeconomic data remains thin on the ground for the remainder of the week. As such, movement in the increasingly risk-sensitive currency may be tied to market risk dynamics.
GBP could strengthen against its safer peers if markets remain cheery. However, bearish trading conditions could stymie Sterling sentiment towards the latter stages of the week.