GBP/EUR: Brexit & Eurozone CPI To Drive Trading Into The Weekend
  • Pound under pressure as Brexit talks make little progress
  • ECB rate announcement due, interest rates expected to remain on hold
  • Euro (EUR) to be driven by projections and expected increase in PEPP
  • At 06:15 UTC, GBP/EUR is trading -0.1% at €1.1180

The Pound is extending losses on Thursday after snapping a three-day winning streak on Wednesday. The Pound Euro exchange rate settled on Wednesday -0.4% at €1.1191.

At 06:15 UTC, GBP/EUR is trading -0.1% at €1.1180 as investors weigh up Brexit and look ahead to the European Central Bank monetary policy decision due later today.

The Pound found some support from domestic data in the previous session, which revealed that activity in the service sector beat expectations at 29 on the gauge in May versus 13.4 in April. However, with the level 50 separating expansion from contraction, the UK’s dominant sector remains deep in contraction.

Brexit and the lack of progress in trade talks is which adding the most pressure on the Pound. Contributing to the Pound’s woes, Bank of England Governor Andrew Bailey has recommended that banks bolster preparations for a no deal Brexit. A final meeting is due between Boris Johnson and European Commission President Ursula von de Leyen later this month, which investors hope will inject some political momentum into negotiations

Today there the construction PMI could attract some attention. However, any Brexit headlines will dominate.

The Euro was strong on Wednesday as investors digested encouraging macro releases and as the European Central Bank meeting draws into focus.

The ECB are broadly expected to keep the interest rate on hold. The latest staff projections will be keenly awaited given that March’s data is so out of date. Back in April the ECB provided three scenarios for GDP depending on the severity of the coronavirus crisis. Expectations are for a medium to hard outcome with GDP expected to fall 8-12% in 2020.

In addition to staff projections, investors will be listening carefully to any increase in the Pandemic Emergency Purchase Programme. Investors are hoping that an increase between €250 billion and €500 billion could be on the cards to buyup debt in those nations most affected by the coronavirus crisis.