Home » GBP » GBP to EUR » Pound Euro (GBP/EUR) Exchange Rate Forecast: Is the ECB Set to Cut Interest Rates This Year?

Pound Euro (GBP/EUR) Exchange Rate Forecast: Is the ECB Set to Cut Interest Rates This Year?

ECB President Mario Draghi

GBP/EUR Exchange Rate Stabilises after Draghi Driven Surge

Trade in the Pound Euro (GBP/EUR) exchange rate is steady this morning as the pairing consolidates Tuesday’s gains following European Central Bank (ECB) President, Mario Draghi’s comments on the need for more stimulus.

At the time of writing the GBP/EUR exchange rate is virtually unchanged this morning, leaving the pairing trading at around €1.1229.

Euro (EUR) to Face Further Losses as Draghi Eyes Further Stimulus?

Following on from some aggressive selling yesterday following Draghi’s market moving speech at the ECB’s annual conference in Sintra, the Euro (EUR) is likely to continue to face an uphill battle in the coming days as markets speculate how this may shape ECB policy going forward.

Analysts were quick to suggest that Draghi’s comments were a clear hint that the bank is open to cutting rates as it continues to wrestle with stubbornly low inflation and slowing growth in the Eurozone.

Andrew Kenningham, Chief Europe economist at Capital Economics, said:

‘Mr Draghi’s speech at the ECB’s conference this morning is the clearest indication yet that the Bank will cut interest rates and relaunch its asset purchase programme in the coming months if, as we expect, measures of inflation and inflation expectations remain very low.’

While the timing of any policy changes from the ECB remains unclear, it appeared that most economists expect it to happen by the end of the year, something that was reflected in the slump in the Euro on Tuesday.   

Pound (GBP) Steady as UK Inflation Meets Expectations

Meanwhile the Pound (GBP) is trading in a narrow range this morning, following the publication of the UK’s latest Consumer Price Index.

According to data published by the Office for National Statistics (ONS), UK inflation slowed modestly in May, slipping from 2.1% to 2%.

However this appears not to have dampened Sterling sentiment as GBP investors were relieved to see inflation remain in the Bank of England’s target range.

GBP/EUR Exchange Rate Forecast: Will the BoE Stick to its Hawkish Outlook?

Looking ahead, the main catalyst for movement in the Pound Euro (GBP/EUR) exchange rate through the remainder of the week looks set to be the conclusion of the Bank of England’s (BoE) June policy meeting.

While no policy changes are expected from the bank this month, GBP investors will be eager to see whether Mark Carney still believes that markets are ‘underestimating’ the pace at which the bank will raise rates, or whether a slowing global economy will prompt a more dovish outlook from the BoE Governor.