GBP/EUR exchange rate muted ahead of ECB meeting
The pound euro (GBP/EUR) exchange rate is trapped in a narrow range this morning ahead of the European Central Bank’s (ECB) upcoming intrest rate decision.
At the time of writing the GBP/EUR exchange rate is trading at around €1.1882, virtually unchanged from this morning’s opening rate.
Euro (EUR) to fluctuate following ECB rate decision?
The euro (EUR) is struggling to catch bids this morning as investors await the ECB’s latest interest rate decision later this afternoon.
While the ECB cut rates in June, no policy changes are expected from the central bank this time around, with interest rates expected to remain on hold at 4.25%.
Investors will therefore look to ECB officials for any forward guidance regarding the possibility of more cuts.
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.’
However, should investors be met with a dovish accord this afternoon instead, the common currency is likely to plummet against its peers.
Pound (GBP) to struggle as August BoE rate cut remains a possibility
The pound (GBP) is dipping against the majority of its peers this morning following the publication of the UK’s latest jobs data.
The Office for National Statistics (ONS) reported that unemployment in June remained at 4.4% while average earnings (excluding bonuses) dropped from 6% to 5.7%.
The fall in regular wage growth marked the lowest reading since August 2022 and in turn revived Bank of England (BoE) interest rate cut bets.
Rob Wood, Chief UK Economist at Pantheon Macroeconomics commented:
‘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.’
The odds of the BoE delivering a cut in August rose from 35% to 40% following the release, and has served to undermine Sterling sentiment this morning.
Looking ahead, the UK’s latest retail sales data is expected to show a 0.4% contraction in June, plummeting from May’s 2.9% reading, and could undermine the Pound should it further stoke BoE rate cut bets for August.
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