Pound euro exchange rate flat ahead of expected ECB rate cut
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning as markets brace for the European Central Bank’s (ECB) latest interest rate decision.
At the time of writing, GBP/EUR is trading at around €1.1966, virtually unchanged from this morning’s opening levels.
Euro (EUR) rangebound ahead of ECB rate decision
The euro (EUR) is trading mostly sideways against the majority of its peers this morning as investors are relucent to place any aggressive bets ahead of the European Central Bank’s upcoming interest rate decision.
Markets are largely anticipating the ECB will enact a 25 basis-point interest rate cut this afternoon, which could see the common currency dip against its peers.
Neil Hutchison, European Liquidity Strategies Portfolio Manager at J.P. Morgan Asset Management commented:
‘With Halloween on the horizon, we’re not expecting any scary surprises from the ECB this week. Spooked by weaker PMI business survey data, the ECB is likely to deliver a 0.25% rate cut. Recent cooling in inflation data means they’re less burdened by potential price pressures. With minimal pushback from ECB members, markets would be surprised if a cut didn’t happen.’
However, the euro could be open to further losses should the central bank’s forward guidance lean dovish and hint at further cuts this year.
Pound (GBP) quiet amid data lull
The pound (GBP) is struggling to garner investor attention this morning as an absence of UK data releases leaves the Pound vulnerable to yesterday’s below forecast inflationary data.
The UK’s latest consumer price index (CPI) came in lower-than-expected last month, with the Office for National Statistics (ONS) confirming that headline inflation fell below the Bank of England’s (BoE) 2% target to for the first time in three years.
This stoked consecutive BoE rate cut bets for November and December, severely dampening Serling sentiment in the wake of the release.
Although the Pound has managed to claw back the majority of its losses from yesterday’s GBP sell-off, the British currency is struggling to rise this morning amid a lack of any other economic drivers.
Pound euro exchange rate forecast: UK retail sales in the spotlight
Looking ahead, the primary catalyst of movement for the pound euro exchange rate looking past this afternoon’s ECB interest rate decision will likely be the UK’s upcoming retail sales data, scheduled for release tomorrow.
The latest retail sales data is forecast to report a downturn in last month’s reading, with the index forecast to dip from a previous score of 1% in August down to a negative 0.3% reading in September.
Should the data print as expected and confirm a decline in last months retail sales, GBP exchange rates could struggle to catch bids and close the week on the back foot.
Turning to the euro, economic data from the Eurozone will be absent from tomorrow’s data calendar which could see the single currency remain vulnerable to today’s upcoming ECB interest rate decision.
Should the central bank’s forward guidance contain any dovish hints about the future of monetary policy in the Bloc, EUR exchange rates will likely also close the week on the defensive.