EUR/GBP Exchange Rate Dips Ahead of ECB Rate Decision
The Euro Pound (EUR/GBP) exchange rate is drifting lower this morning as investors grow increasingly wary of the single currency ahead of the European Central Bank’s (ECB) latest policy decision.
At the time of writing EUR/GBP exchange rate is down roughly 0.2% from today’s opening levels, leaving the pairing trading just shy of a five-week low at £0.8921
Can the ECB Deliver on its Stimulus Promise?
All eyes are on the ECB this week for what looks to be the bank’s most anticipated policy decision in years, a decision which could have a long-term impact on the Euro (EUR).
Economic headwinds have seen the Eurozone economy slow to a crawl in recent months, with the twin threats of Brexit and a US-China trade war both battering growth.
In light of this the ECB has signalled that it will announce a ‘substantial’ stimulus package this month in order to shore up the Eurozone’s ailing economy and help protect it from potential shocks.
However, question still linger over what this package may contain and how effective these measures might be.
There are fears that Mario Draghi’s last act as ECB President before he steps down on 31 October could fall short of expectations, with the Euro likely to tumble if markets are doubtful over the impact the stimulus may have on the Eurozone economy.
Sunny Oh at MarketWatch suggests:
‘Push back by some ECB policy makers on the case for further easing, has dampened hopes that the central bank will announce an ambitious stimulus package.
‘Draghi has insisted it still has policy tools available amid questions that the central bank has run out of ammunition, but analysts say it’s not clear if monetary policy can boost economic growth in a world where debt yields are already negative.’
Much may depend on the bank’s forward guidance and whether the bank and its incoming President, Christine Lagarde will be committed to further easing.
UK Faces More Political Chaos as Suspension of Parliament Ruled Unlawful
Meanwhile, there looks to be more political drama on the horizon for the Pound (GBP) after Scotland’s highest civil court deemed Boris Johnson’s proroguing of parliament as unlawful.
While MP’s urged the recalling of parliament in light of the judgement, the court would not give the order to cancel the suspension of ahead of a Supreme Court decision scheduled for next week.
The ruling will prove to be yet another headache for Johnson’s government, with the continued eroding of the PM’s authority potentially supporting another move higher for Sterling.
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