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Pound Sterling to Euro Exchange Rate Slips from Best Levels on ECB Confidence

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Pound to Euro Exchange Rate Slips Back as European Central Bank Launches Policy Review

While the Euro’s (EUR) movement was little changed by today’s European Central Bank (ECB) news, the Pound Sterling to Euro (GBP/EUR) exchange rate still slipped slightly.

Investors were a little more willing to firm in the Euro after ECB policymakers expressed confidence in the bank outlook.

ECB President Christine Lagarde said that the bank was closely watching global trade developments, but noted that recent developments were causing uncertainty to fade.

Lagarde also launched a sweeping review of ECB monetary policy. The review will explore if the bank’s current strategy is as effective as it could be and could last as long as a year.

The bank was not particularly more hawkish than expected, but did boost hopes that there were signs of economic recovery abound. This helped the Euro to hold its ground.

(Originally published 10:51am 23/01/2020)

Pound to Euro Exchange Rate Holds Ground Ahead of European Central Bank

Investors are hesitant to move too much on the Euro (EUR) ahead of today’s anticipated European Central Bank (ECB) policy decision, making it easier for the Pound Sterling to Euro (GBP/EUR) exchange rate to hold gains.

Since opening this week at the level of 1.1735, GBP/EUR has been advancing. GBP/EUR gains only became more solid since Tuesday, and last night the pair touched on a one-month-best of 1.1867.

At the time of writing on Thursday morning, GBP/EUR is trending a little lower in the region of 1.1844. Investors currently anticipate the afternoon’s key European Central Bank news.

The Pound (GBP) is advancing in reaction to UK data and Bank of England (BoE) speculation. Movement could shift again before the end of the week though, as Friday’s PMI data could further influence central bank bets.

Pound (GBP) Exchange Rates Sustains Gains on UK Growth Hopes

For the time being, Bank of England (BoE) interest rate cut bets are dimmed. This has been among the primary causes of Pound gains in recent sessions.

This week’s UK job market stats, as well as confidence and retail figures from the Confederation of British Industry (CBI), have boosted hopes that Britain’s economy could rebound in 2020.

As a result, even with persisting Bank of England interest rate cut speculation, the Pound is seeing strong gains. Investors are becoming more hopeful that Britain’s economy will rebound this year, despite BoE and Brexit uncertainties.

Even if the BoE cuts rates next week, it could be done amid signals that a rebound is also expected. According to analysts from MUFG:

‘It is now up to the BoE to decide whether they want to allow more time to assess whether the UK economy rebounds as expected before deciding on providing more stimulus, or to pull the trigger now to help reinforce the expected recovery,’

Euro (EUR) Exchange Rates Lack Drive as Markets Await European Central Bank (ECB)

While recent Eurozone data has been decent and the European Central Bank (ECB) is not expected to become more dovish on the outlook, the Euro lacks drive in recent sessions.

ZEW’s latest German and Eurozone economic sentiment stats came in well above expectations. However, investors are still anxious about the tone the ECB will take on global factors like trade and global growth.

As it will be one of ECB President Lagarde’s first press conferences with the bank, markets are anxious to see if she will deliver any unexpected signals.

According to analysts from MUFG:

‘The ECB is likely to acknowledge that downside risks have eased, but there is no need to signal that it plans to deviate from their looser-for-longer policy message at the current juncture,’

Pound to Euro (GBP/EUR) Exchange Rate Looks Ahead to PMIs after ECB Decision

While the European Central Bank’s (ECB) January policy decision is most likely to drive the Pound to Euro (GBP/EUR) exchange rate today, movement may quickly become limited again as investors await tomorrow’s key data.

Friday will see the publication of some of this week’s most influential Eurozone and UK ecostats. Markit’s latest PMI projections will give investors a better idea of how economies are performing at the beginning of 2020.

In particular, Pound investors will be keeping a close watch on UK PMIs. Weak data will boost bets that the Bank of England (BoE) will cut interest rates next week, which could lead to a Pound slump.

German manufacturing projections could be most influential for ECB speculation and Euro investors. This is because Germany’s recent manufacturing difficulties have been among the primary causes of Eurozone economic concerns.

Another speech from ECB President Christine Lagarde will also be held tomorrow, which could cause further late-week movement in the Pound to Euro (GBP/EUR) exchange rate.