Pound euro (GBP/EUR) wobbles following ECB rate cut
(Updated 16:30, 12/09/24) The pound euro (GBP/EUR) exchange rate is trading without a clear direction this afternoon after the European Central Bank (ECB) delivered a widely expected interest rate reduction at its latest monetary policy meeting
Yael Selfin, Chief Economist at KPMG, said:
‘Today’s decision to cut interest rates comes amidst a sluggish economic backdrop. Growth in the Eurozone has underperformed expectations with activity likely to weaken in the second half of the year. The ECB may have been wary of falling behind the curve, especially as growth in the Eurozone has lagged behind the US, with the Fed looking poised to cut rates next week.’
However, as markets widely expected the bank to deliver this move, the euro’s (EUR) losses were limited in scope.
Looking to the pound (GBP), an ongoing lull in UK releases leaves GBP largely rangebound against its rivals this afternoon.
Looking ahead, could signs of rebounding industrial production in the Eurozone bolster the single currency tomorrow morning?
At the time of writing, GBP/EUR is trading at €1.1849, virtually unchanged from this morning’s opening levels.
Original article continues below:
Pound euro (GBP/EUR) exchange rate fluctuates as markets await ECB monetary policy meeting
The pound euro (GBP/EUR) exchange rate is largely rangebound this morning as markets brace for the European Central Bank’s (ECB) imminent interest rate decision.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1847, virtually unchanged from this morning’s opening rate.
Euro (EUR) buoyed ahead of ECB rate decision
The euro (EUR) is largely subdued this morning ahead of the European Central Bank’s looming interest rate decision.
The bank is due to deliver its latest move this afternoon, with markets widely anticipating a rate reduction of 25 basis points. News of easing price pressures and continually sluggish growth across the Eurozone’s largest economy have left the single currency on the back foot in recent days, while cooling inflation across the wider bloc serves to reinforce speculation of a September rate cut.
Piet Haines Christiansen, Director of Danske Bank, said:
‘While an October rate cut could happen … we think it is unlikely that the incoming information between the September and the October meeting will be sufficiently weak to bring an October rate cut in play.’
In the meantime, investors may remain reluctant to place any aggressive bets on the euro as markets brace for potential hints as to the bank’s path forward this afternoon.
Pound (GBP) subdued amid absence of data
The pound (GBP) is moving without a clear trajectory this morning amid a lack of fresh UK data.
With data in short supply, an unclear market sentiment further deters investor interest in the increasingly risk-sensitive pound.
Meanwhile, tailwinds from yesterday’s weaker-than-forecast UK growth data seem to weigh on GBP this morning amid a lack of fresh impetus.
Chris Turner, Global Head of Markets at ING, said:
‘UK rates softened quite a lot yesterday and for the month so far, two-year sterling swap rates are off around 30bp. It is unclear whether this is a function of the soft UK GDP data yesterday or more just a conviction that rates will be taken lower around the world and that the UK should be no exception – despite radio silence from the Bank of England.’
While markets had previously speculated over a less aggressive policy-easing cycle by the Bank of England (BoE) compared to that of other major central banks, signs of global policy unwinding and sluggish UK growth appear to limit a recovery for GBP this morning.
Pound euro exchange rate forecast: ECB in focus
Looking ahead, the core catalyst of movement for the pound euro exchange rate this afternoon will likely be the ECB’s impending monetary policy decision. While markets expect the bank to lower rates today, any dovish guidance during the ECB’s accompanying press conference may serve to dent EUR exchange rates this afternoon.
Elsewhere, global risk dynamics could impact the currency pairing. The pound may benefit from an improving market sentiment, while a move towards gloomy trading conditions could see the safe-haven euro take precedent.