GBP/EUR: Gloomy Brexit News Weigh On Pound vs. Euro
  • Pound (GBP) rises as Johnson plans the economic recovery
  • OECD sees UK growth stalling next year
  • Euro (EUR) tumbles after ECB meeting despite the hawkish turn
  • No major data today

The Pound Euro (GBP/EUR) exchange rate is edging lower on Friday after strong gains yesterday. The pair settled +0.55% on Thursday at €1.1763 after trading in a range between €1.1636 – €1.1787. At 05:45 UTC, GBP/EUR trades -0.08% at €1.1753. The pair is set to gain 0.9% across the week.

The euro tumbled lower in the previous session despite the European Central Bank finally turning more hawkish. The ECB kept interest rates on hold in June and announced the end to the net asset purchase programme. The ECB also signaled that it would raise interest rates by 25 basis points in July and hinted that an outsized rate hike of 50 basis points was also on the table for the September rate hike.

The ECB staff projections highlighted the extent of the challenge that the central bank faces in reining in inflation. The central bank now expects economic growth of 2.8% this year down from 3.7% and growth of 2.1% in2023 down from 2.8%. Meanwhile, inflation for 2022 is now expected to be 6.8%, up from 5.1%.

The euro initially rose on the decision but fell sharply following the projections which paint a deteriorating picture where a recession looks difficult to avoid.

Looking ahead there is no high impacting Eurozone data so investors will continue digesting the ECB rate decision.

The pound rose against the euro yesterday after Prime Minister Boris Johnson set out his plan to revive the economy. The Prime Minister set out his economic plan with housing a priority as he sets about tackling the soaring cost of living.

His plan comes a day after the OECD warned that the UK will see the slowest growth of the G7 economies.

Looking ahead there is no high impacting UK economic data. Instead, investors will look ahead to next week when the BoE is expected to raise interest rates by a further 25 basis points, marking the fifth straight meeting of rate hikes,