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Will GBP/EUR Fall Post ECB Rate Hike?

Pound coin on a Euro banknote

Pound Euro (GBP/EUR) Exchange Rate Narrows Ahead of ECB Interest Rate Decision

The Pound Euro (GBP/EUR) exchange rate is trading in narrow boundaries today, as investors look towards the European Central Bank’s (ECB) latest interest rate decision.

At the time of writing, GBP/EUR is trading at around €1.1372, showing little movement from the morning’s opening rates.

Will EUR Climb Post ECB Decision?

The Euro (EUR) is likely to see more movement this afternoon, as the European Central Bank (ECB) are scheduled to publish their latest interest rate decision.

While markets are increasingly leaning towards a 25bps hike today, room remains for a more aggressive 50bps hike. However, the consensus is shifting towards 25bps, followed by up to two additional hikes over the remainder of the year.

As this hike is priced in, the actual delivery may not contribute much to EUR rates. However, the accompanying press conference is likely to provide direction. If ECB President Christine Lagarde keeps the door open for further hikes, EUR may climb further over the rest of the session.

Looking ahead to tomorrow, EUR could struggle for support. Firstly, the latest set of German factory orders data is scheduled to print. A sharp fall is forecast, with orders falling by 2.2% over the month. As an especially steep drop compared to February’s 4.8% increase, this may dent the common currency.

The latest retail sales data for the Eurozone soon follows. Over March, sales are forecast to have fallen 0.1% on a month-by-month basis. This may add to the Euro’s troubles, but could be limited as it reflects an improvement from the previous -0.8% print.

GBP to See Limited Movement amid Sparse Data Calendar?

Over the course of today’s session, the Pound (GBP) is unlikely to see much in the way of firm movement. Data releases are thin on the ground, meaning that external factors are likely to drive Sterling.

As an increasingly risk-sensitive currency, shifts in market mood are more likely to impact GBP rates. For instance, if the mood turns sour towards the week’s end, Sterling may be unable to gain much ground.

Domestic headwinds may impact Sterling over the remainder of the week’s session. Today, polls for local elections opened across the UK. The Pound may waver as investors await news of the election results.

Elsewhere, continued bets that the Bank of England (BoE) will enact a 25bps hike in May could keep Sterling cushioned. If this remains the consensus amongst investors, then GBP could climb as we approach the decision next week.

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