- Pound (GBP) has taken a back seat this week
- Services PMI data is due
- Euro (EUR) awaits the ECB rate decision
- A 25 bps and 50 bps hike will be discussed
The Pound Euro (GBP/EUR) exchange rate is holding steady after gains yesterday. The pair rose 0.26% in the previous session, settling on Wednesday at €1.1357, after trading in a range between €1.1307 – €1.1374. At 05:45 UTC, GBP/EUR trades +0.00% at €1.1357.
The euro traded quietly in the previous fashion on a quiet day for economic data and as investors looked ahead to today’s European Central Bank interest rate decision. The ECB is expected to weigh up both a 25 and 50 basis point rate hike as inflation remains sticky in the region.
The latest CPI inflation data released earlier in the week showed that consumer prices ticked higher to 7% in April up from 6.9% previously. However, core inflation edged lower to 5.6% from the record 5.7% in the month before.
Meanwhile, growth in the region has stalled. GDP for Q1 was weaker than expected at 0.1% so stalling growth and sticky inflation highlight the challenges that the ECB faces.
The ECB is interest rate level is currently at 3.5% the highest level since 2008 and whilst ECB members have sounded hawkish in recent speeches, only the Austrian central bank president has openly committed to a 50 basis point hike. Other policymakers, such as Isabel Schnabel, have said that both 25 and 50 bps will be considered.
The pound has taken a back seat this week with the Federal Reserve rate decision and the ECB rate decision dominating moves in the forex market. Still, the pound remains broadly supported as the Bank of England is expected to continue its hiking cycle.
This week has been a quiet week for economic data. Today sees the release of the services and composite PMI for April. Expectations are for services PMI to confirm the preliminary reading of 54.9 up from 52.9 in March.
Meanwhile, the composite PMI is expected to confirm 53.9 in April up from 52.2. The level 50 separates expansion from contraction.