- Pound (GBP) slips ahead of BoE monetary policy announcement.
- No changes to policy expected.
- Euro (EUR) boosted by CPI beat & Draghi optimism.
- Eurozone retail sales in focus.
The Pound Euro (GBP/EUR) exchange rate is edging lower on Thursday, extending losses for a second session. The pair settled -0.1% lower at €1.1338, near the low of the day. At 05:15 UTC, GBP/EUR trades -0.1% at €1.1325.
The Bank of England will announce its monetary policy announcement today along with the quarterly inflation report. The central bank is not expected to make any changes to policy after expanding the quantitative easing programme in November.
Talk surrounding negative interest rates will also be in focus as the bank releases its findings from its consultation into the use of negative rates. Economists are broadly expecting the BoE to support negative rates as a tool but stop well short of using them. In recent comments BoE Governor Andrew Bailey has distanced himself from the use of negative rates.
The near-term economic picture has deteriorated since the last meeting. However, the outlook across the second quarter of the year and the second half of the year has significantly improved. With the covid vaccine rollout gathering pace, covid cases falling and Brexit in the rear view mirror there is a chance that the Bank of England could even sound cautiously optimistic regarding the outlook.
The Euro managed to find its feet in the previous session after two days of losses. Eurozone inflation was jumped by the most is over a decade which helped to underpin the common currency. After five straight months of falling prices inflation shot up by more than expected rising buy 0.9% in January up from -0.3% in December. Analysts had forecast a rise of 0.5%.
Also boosting the Euro are reports that ex European Central Bank President Mario Draghi could attempt to form a government in Italy after being summoned by the President Sergio Mattarella.
Eurozone retail sales data will be the principal focus on the European economic calendar.