Pound euro firms following ECB interest rate decision
(Updated 16:00, 11/04/24) The pound euro (GBP/EUR) exchange rate firmed on Thursday afternoon following the European Central Bank’s (ECB) latest interest rate decision.
Although the central bank kept rates unchanged at 4.5% for a sixth consecutive time, dovish commentary from the bank’s President Christine Lagarde saw euro (EUR) exchange rates slump in the aftermath of the release.
Although officials held the interest rate at 4.5%, the news that some policymakers were ready to stat unwinding monetary policy immediately set to stymie the EUR during this afternoon’s European session.
The pound (GBP) has struggled to hold onto its modest gains following the release of some hawkish commentary from Bank of England (BoE) official Megan Greene. As markets have entered inro afternoon trade, Sterling is now wavering against its peers.
At the time of writing, GBP/EUR is trading at around €1.1693, an increase of roughly 0.2% from today’s opening levels, having briefly touched a fresh one-week high of €1.1703.
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Pound euro (GBP/EUR) exchange rate firms ahead of ECB rate decision
The pound euro (GBP/EUR) exchange rate has ticked up this morning following some hawkish commentary from Bank of England policymaker Megan Greene.
At the time of writing, the GBP/EUR exchange rate is trading at around €1.1685, up roughly 0.2% from this morning’s opening rate.
Pound (GBP) drifts higher following BoE comments
The pound (GBP) is enjoying some modest support this morning following some hawkish observations from BoE external monetary policy member Megan Greene.
Following the latest US inflation data that saw the US dollar (USD) surge yesterday on the back of delayed interest rate cut bets, Greene also argued that rate cuts in the UK are still ‘a way off’.
Greene explained:
‘There has been encouraging news on UK wage growth and services inflation in recent months. The risk of inflation persistence is diminishing as these indicators come down in line with the MPC’s forecast. But they remain higher than in other advanced economies, particularly the US.
‘Momentum in the markets has been towards pricing in later rate cuts by the Fed as economic growth remains robust. In my view, rate cuts in the UK should still be a way off as well.’
As the US FedWatch Tool now indicates that markets are pricing in a primary rate cut in September rather than June, Sterling sentiment is being lifted following the BoE’s comparative comments.
Euro (EUR) muted ahead of ECB interest rate decision
The euro (EUR) is trading in a narrow range this morning, as investors look ahead to the European Central Bank’s upcoming interest rate decision.
As the central bank is widely expected to keep interest rates unchanged at 4.5% for a fifth consecutive meeting this afternoon, investor attention will likely shift to the accompanying forward guidance.
With many economists speculating that the ECB will begin loosening its monetary policy in June, should policymakers hint that markets are correctly pricing in the early summer rate cut, EUR exchange rates could slide.
With the potential for volatility in the euro later on, EUR investors are reluctant to drastically alter their positions in the run-up to the ECB decision.
Pound euro exchange rate forecast: UK GDP to undermine the pound?
Looking ahead, the primary catalyst of movement for the pound euro exchange rate will be the ECB decision this afternoon.
If the bank paves the way for a cut in June, the euro could fall sharply. EUR could face even steeper losses if the bank delivers a surprise rate cut at today’s decision.
For GBP investors, the focus will then shift to the UK’s latest GDP reading.
Scheduled for release on Friday, the data is expected to report a 0.1% increase following a previous reading of 0.2%.
This could see Sterling sentiment sapped at the end of this week should the data confirm that UK economic growth slowed to a crawl in February.