The British pound is little changed against the euro on Wednesday afternoon with market activity subdued while traders await the latest decision from the US Federal Reserve.
GBP/EUR was higher by 7 pips (+0.05%) at 1.1826 with a daily price range of 1.181 to 1.184 as of 1pm GMT. The currency pair rose steadily throughout the morning before finding resistance at 1.183, leaving it still lower on the week.
EUR/USD is the most actively traded forex contract and the euro is the biggest component of the Dollar index, the most popular instrument to judge the performance of the US dollar. This generally means the euro is most negatively correlated with the US dollar. So on days like today when the dollar is rising before a Federal Reserve rate decision, the euro is often the one falling as a result.
It was not just dollar-buying that drove the euro lower though. A mixed bag of minor economic data releases on Wednesday from Eurozone countries, including German consumer confidence and Spanish retail sales gave little impetus to buy the euro.
There were some comments from ECB policymaker Oli Rehn that had some fleeting influence on the euro’s movements today. Rehn said that the latest information on core inflation signal that it is moving higher. That is a more upbeat tone not heard in the press conference from ECB President Christine Lagarde after last week’s monetary policy meeting. More in tune with the reluctance to back away from monetary stimulus heard at the past ECB meeting was Rehn’s comment that “If we need to strengthen policy, we still have the tools to do so.”
The selling ahead of Thursday’s Bank of England meeting abated somewhat on Wednesday with attention temporarily diverted to the meeting of the US Federal Reserve.
The European parliament will vote today on the UK withdrawal agreement. It is generally considered a foregone conclusion that the bill will pass without an issue so will not be a factor for the British pound. It is the last formality before ‘Brexit Day’ on Friday.
