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EUR/GBP Exchange Rates Fluctuates: ECB Unlikely to Signal Policy Changes Next Week?

ECB President Mario Draghi

Possible Delay to ECB QE Tapering Announcement Dents EUR/GBP

The Euro Pound (EUR/GBP) exchange rate was met by volatility today, following reports that the European Central Bank (ECB) is unlikely to alter its stimulus programme this month.

At the time of writing EUR/GBP is close to its opening levels but has fluctuated in a range of around 0.2% throughout Tuesday’s trading session.

Euro (EUR) Stumbles as Early Tapering Looks Unlikely

The Euro struggled in today’s trading session as ECB sources cast doubts on the chance of the bank tightening its monetary policy next week.

The Euro has made consistent gains over the last week following the release of the minutes from the most recent ECB policy meeting.

The minutes suggested that there was growing support from within the bank to revise its policy message in ‘early’ 2018, something investors took to signal that policymakers would seek to further reduce its bond-buying programme.

However it appears that markets may have jumped the gun a little as Reuters reports that sources at the ECB suggest that the bank wants more time to assess the outlook for the economy and the Euro.

This has dampened hopes of an announcement of further tapering at the ECB’s latest policy meeting next week, with the sources suggesting that any changes to the guidance would likely come in March at the earliest.

Pound (GBP) Fluctuates Following Dip in Inflation

At the same time the Pound has also fluctuated today in the wake of the UK’s latest CPI figures.

According to data published by the ONS, inflation in the UK dipped from a five-year high of 3.1% to 3% in December, in line with market expectations.

Markets fear the dip in inflation will relieve some of the pressure on the Bank of England (BoE) and dampen the chances that it will raise interest rates again in 2018.

However it wasn’t all doom and gloom as the dip in inflation also helped to narrow the gap with wage growth, something that should put less pressure on consumers and may prompt spending to rebound in the coming months.

EUR/GBP Forecast: Saunders to Confirm Dovish BoE Outlook?

Looking ahead movement in the EUR/GBP exchange rate is likely to be driven by a speech from the BoE’s Michael Saunders tomorrow, with any hints that the bank will remain dovish in 2018 likely weighing on the Pound.

Meanwhile the Euro may struggle on Wednesday if the Eurozone’s latest CPI figures that inflation fell across the bloc in December.