Pound Sterling Euro (GBP/EUR) Exchange Rate Softens Ahead of ECB Announcement
Ahead of the European Central Bank’s (ECB) July policy meeting the Pound Sterling to Euro (GBP/EUR) exchange rate struggled to find much traction.
While investors do not expect to see any change in monetary policy at this juncture there are hopes that policymakers will shift towards a more hawkish outlook.
If President Mario Draghi adopts a relatively optimistic tone in comments to the press this afternoon the Euro (EUR) is likely to experience a solid boost across the board.
EUR exchange rates are vulnerable to further downside pressure, though, if the contents of the policy announcement prove disappointing.
As analysts at BNP Paribas noted:
‘Although the overall tone of data has perked up since its June meeting, we do not expect the ECB to sound much different on 26 July.
‘Increased confidence in inflation is somewhat offset by mounting concern about the implications of the trade war, suggesting caution at the ECB.
‘We think Mario Draghi will probably dodge any questions on the timing of the next rate move, referring journalists to his statement from 14 June.’
GBP/EUR Exchange Rate Gains Limited as EU-US Trade Tensions Ease
The Pound Sterling to Euro (GBP/EUR) exchange rate also came under pressure after trade tensions between the EU and US eased overnight.
As the sides backed away from a potential trade war this encouraged a general increase in market optimism, with the threat of US tariffs on EU car imports apparently off the table once again.
Even so, given the unpredictable nature of the Trump administration and the previous collapse of a similar agreement with China the Euro did not benefit from the announcement for long.
With investors still wary of the US push towards protectionism the upside potential of EUR exchange rates remained limited on Thursday morning.
Political jitters failed to limit Pound Sterling (GBP), meanwhile, with speculation over Brexit temporarily easing now that the UK Parliament is on summer recess.
Increasing German Price Pressures Forecast to Boost Pound Sterling Euro (GBP/EUR) Exchange Rate
Ahead of the weekend, the Pound Sterling to Euro (GBP/EUR) exchange rate may weaken on the back of the latest German import price index.
Signs of increasing price pressure within the Eurozone’s powerhouse economy would give the Euro fresh cause for confidence.
As forecasts point towards an uptick of 4.5% in import prices on the year this could encourage hopes that the increase will filter through into the wider economy.
Evidence that inflation is building may see EUR exchange rates return to a bullish trend.
However, expectations are not so positive for the second quarter French gross domestic product, which is estimated to ease from 2.2% to 1.9% on the year.
Given existing worries over the outlook of the wider Eurozone economy any signs of slowing growth would give the Pound Sterling to Euro (GBP/EUR) exchange rate a solid rallying point.
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