- Pound (GBP) pares some of Thursday’s gains ahead of GDP data
- EUR – UK agree £333 million fishing deal
- Euro (EUR) fell on dovish ECB
- ECB keeps PEPP purchase elevated
The Pound Euro (GBP/EUR) exchange rate is ticking lower on Friday, after strong gains in the previous session. The pair settled higher on Thursday, up +0.47% at €1.1643 at the high of the day. At 05:45 UTC, GBP/EUR trades -0.05% at €1.1637. The pair is set to finish the week at approximately the same level that it started.
As expected, the European Central Bank kept interest rates on hold and the PEPP asset purchase programme at €1.85 trillion. The ECB will also maintain the current pace of its bond purchases in the coming weeks. The central bank had upped the pace of purchases in March. Some market participants had expected the ECB to slow purchases back to pre-March levels.
Despite keeping monetary policy ultra-lose the ECB upwardly revised both growth and inflation forecasts for the bloc. Inflation forecasts was upwardly revised to 1.9% this year, however it is expected to fall back to 1.4% by 2023. The GDP forecast was also revised higher to 4.7% from 4.6%.
Covid cases are falling, and lockdowns are being lifted across the region, but ECB President Christine Lagarde said that it was still too early to consider scaling reining in bond purchases.
Whilst the picture is improving, the data remains mixed. The ECB will want to see more evidence of the recovery before they take action.
The Pound jumped higher versus the Euro and the Pound in the previous session after a long awaited break through on fishing with the EU. The British government announced that it had reached a deal with the EU on fish stocks for 2021. The deal is said to be worth £333 million to the UK fishing industry. Fishing was a sticking point in Brexit negotiations.
Attention will now turn to the release of UK GDP data for the three months to April by the Office. Of National Statistics. Analysts are expecting a 1.5% growth, up from a -1.5% contraction the previous month.