Pound Euro (GBP/EUR) muted following ECB rate decision
(Updated 16:45, 18/07/24) The pound euro (GBP/EUR) exchange rate remained mostly subdued following the European Central Banks (ECB) latest intrest rate decision.
Talks of persistent inflation served to keep the euro (EUR) above ground this afternoon, with officials hinting that monetary policy may need to remain restrictive for longer than anticipated.
The pound (GBP) faced continued pressure as GBP investors remained reluctant to place bids following this morning’s lackluster jobs report.
At the time of writing, GBP/EUR is trading at around $1.1893, virtually unchanged from today’s opening levels.
Original article continues below:
Pound euro (GBP/EUR) exchange rate rangebound ahead of ECB rate decision
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning following the publication of the UK’s latest labour data.
At the time of writing, GBP/EUR is trading at around €1.1878, virtually unchanged from this morning’s opening levels.
Pound (GBP) undermined by UK labour data
The pound (GBP) is struggling to attract investor attention this morning following the release of UK’s latest labour data.
The Office for National Statistics (ONS) reported unemployment held at 4.4% in June while average earnings (excluding bonuses) dipped from 6% to 5.7%, marking the lowest reading in almost two years.
The fall in regular wage growth has revived Bank of England (BoE) interest rate cut bets. The odds of a rate cut in August rising from 35% to 40% in the wake of the data..
The odds for an August rate cut had previously fallen on Wednesday in the wake of the UK’s latest inflation figures.
Rob Wood, Chief UK Economist at Pantheon Macroeconomics commented:
‘Rate setters will breathe a sigh of relief after today’s labour market data, which leaves open the option to cut in August despite hot CPI services inflation. Rate setters will be encouraged by softer private sector pay growth in May, suggesting only small upside risks to their forecast for Q2 pay growth. We think an August rate cut is a very close call. The MPC could easily dismiss yesterday’s stronger-than-expected CPI services reading as volatile, just as they did in June, note slowing wage growth, and plough on with a rate cut in August.’
Euro (EUR) flat ahead of ECB rate decision
The euro (EUR) is trading sideways against the majority of its peers this morning as investors await the latest European Central Bank interest rate decision.
As the ECB is widely expected to keep interest rates on hold at 4.25% this afternoon, markets will be focused primarily on the central bank’s forward guidance.
Should ECB officials fail to provide a clear consensus, EUR movement may be limited, however, should the ECB hint at any further cuts, the single currency could falter.
Nordea Economist Jan von Gerich commented:
‘Lagarde will leave more doors open by continuing to emphasise the data-dependent nature of the ECB, making it too early to give any firmer signals about future meetings.’
Pound euro exchange rate forecast: UK retail sales to drive movement
Looking past the ECB’s upcoming interest rate decision, the pound euro exchange rate could experience some volatility tomorrow following the publication of the UK’s latest retail sales data.
June’s month on month figure is forecast to print at -0.4%, significantly lower than May’s 2.9% surge, and could undermine the Pound should it further fuel BoE rate cut bets.
Turning to the euro, economic data will be scarce on Friday, leaving EUR exchange rates to trade without a clear direction at the end of this week.