- Pound (GBP) is edging lower in cautious trade
- Brexit concerns remain after EU refuses to renegotiate N.Ireland protocol
- Euro (EUR) looks to ECB rate decision
- Inflation is rising at the fastest pace in a decade
The Pound Euro (GBP/EUR) exchange rate is rising higher on Thursday paring small gains from the previous session. The pair settled +0.08% higher on Wednesday at €1.1651. At 05:45 UTC, GBP/EUR trades -0.03% at €1.1646.
The Pound steadied on Wednesday but failed to gain much ground amid concerns surrounding the government’s tax hike and ongoing Brexit concerns. The EU on Wednesday rejected the UK’s demand to renegotiate the Northern Ireland protocol.
Under the protocol agreed in the Brexit deal, the UK agreed to leave some EU rules in place in Northern Ireland whilst accepting checks on goods arriving from elsewhere in Britain. According to the government the arrangement was not working and therefore change was demanded.
The EU have rejected the claim insisting that the protocol which was agreed to protect the EU’s single market can still work.
There is no high impacting UK data until Friday when the UK GDP reading will be in focus.
The Euro held its ground versus the weaker Pound on Wednesday but fell versus the US Dollar. However, this was more of a US Dollar strength story.
Today all eyes are on the European Central Bank which will make its monetary policy announcement later today. The ECB will be taking their decision as inflation sits at an almost decade high at 3% year on year growth in July. Core inflation jumped from 0.7% in June to 1.5% in July.
The ECB hawks came out in force last week stating the case for tapering bond purchases. However, there are still plenty of doves on the governing council and data has been mixed to disappointing rather than upbeat so it could be a very close vote.
Should the ECB start to rein in its bond purchases then the Euro could shoot higher.