- Pound (GBP) falls as UK – EU tensions rise ahead of G7
- Covid cases could derail final stage of re-opening
- Euro (EUR) awaits ECB announcement
- ECB could bring PEPP purchase rate back to pre-March levels
The Pound Euro (GBP/EUR) exchange rate is ticking higher after 3 straight sessions of losses. The pair settled -0.3% lower on Wednesday at €1.1589 towards the low of the day. At 05:45 UTC, GBP/EUR trades +0.07% at €1.1597.
The Pound came under pressure in the previous session as tension between the EU and the UK escalated. The two sides held talks over the Northern Ireland protocol agreed in the Brexit divorce.
The EU said that patience is wearing thin over the Northern Ireland border check dispute. The EU top official Maros Stefcovic warned of tariffs and taxes on imports if the UK didn’t start carrying out full checks on supermarket goods and parcels moving from Great Britain to Northern Ireland. The Pound dropped sharply on those comments.
Concerns surrounding rising covid cases are also pressurizing the Pound. Primer Minister Boris Johnson said that it was still too early to decide if lockdown will end on June 21.
There is no high impacting UK data due to be released today. Attention will be on the start of the G7 meeting in Cornwall and covid numbers.
All eyes are on the European Central Bank monetary policy announcement due later today. The central bank is not expected to move on policy, keeping interest rates steady at 0.0%. On May 21st ECB Governor Christine Lagarde said that it was too early to start discussing reining in the €1.85 trillion Pandemic Emergency Purchase Programme. Even so, investors will be watching closely to see if there are any clues as to when the ECB could start to taper support.
Back in March the central bank increased the pace of bond buying. Data has been mixed with PMIs beating forecasts and retail sales missing estimates. However, with economies in Europe re-opening and the ECB could adjust the wording of the statement to bring purchases back down to pre-March levels in the future. However, with some countries still with pandemic restrictions in place, the ECB might just leave purchases as they are.