GBP/EUR: Will UK Inflation Data Pull Pound Lower?
  • Euro (EUR) rises in risk on trade
  • ECB expected to keep policy unchanged
  • US Dollar (USD) eases lower on stimulus hopes
  • Jobless claims to remain elevated

The Euro US Dollar (EUR/USD) exchange rate trades higher on Thursday, paring losses from the previous session. The pair settled on Wednesday at -0.1% at US$1.2114 after picking up from a low of US$1.2077. At 09:45 UTC, EUR/USD trades +0.3% at US$1.2142 at the high of the day.

Euro investors are looking ahead to the European Central Bank monetary policy announcement due at 12:45pm GMT. This will be followed by a press conference at 13:30.

The central bank is not expected to adjust monetary policy, particularly in light of the changes to policy in the last meeting. In December the ECB expanded the PEPP bond buying programme and extended it until March 2022.

Since the last meeting near term risks have increased as covid cases continue to surge and tighter lockdown restrictions have been imposed. Just this week Germany has once again extended its lockdown.

However medium term risks have eased with the rollout of vaccines and with the prospect of US stimulus picking up. With this in mind the ECB could sound more upbeat in today’s meeting, although analysts aren’t expecting any fireworks.

The US Dollar price action could be the bigger driver of the pair. The greenback is continuing its decline as President Biden has his full first day in office as US President.

Optimism surrounding a $1.9 trillion US stimulus package is boosting risk appetite whilst sapping demand for the safe haven greenback. Equities on Wall Street drove higher with fresh record highs being notched up. US futures are pointing to another stronger start on Wall Street today.

Attention will now turn to US jobless claims data due later. Analysts are expecting 910,000 Americans signed up for unemployment benefit last week. This is down slightly from the previous reading of 965,000 a 5 month high.