GBP/EUR: Will ECB Minutes Boost Euro vs. Pound?
  • Pound (GBP) supported by hawkish BoE expectations
  • BoE rate decision is next week
  • Euro (EUR) boosted by a hawkish ECB
  • ECB hiked rates by 25 bps

The Pound Euro (GBP/EUR) exchange rate is rising after losses yesterday. The pair fell -0.09% in the previous session, settling on Thursday at €1.1675 and trading in a range between €1.1637 – €1.1706. At 09:25 UTC, GBP/EUR trades +0.10% at €1.1686. The pair is set to fall -0.08% this week after two weeks of gains.

The euro pushed higher on Thursday after the ECB raised interest rates by 25 basis points to 3.5%, the highest level in 22 years. The move comes as the central bank continues to fight against inflation, even as the latest data showed that inflation cooled by more than expected in May. With inflation at 6.1%, it is still three times the central bank’s target rate.

In addition to the interest rate hike, the ECB increased its headline inflation forecast to be 5.4% at the end of this year and 3% in 2024. Growth for the region was also downwardly revised after the eurozone tipped into recession at the start of the year.

ECB president Christine Lagarde adopted a hawkish tone, signaling that the central bank will raise interest rates again in July. Analysts at Morgan Stanley have revised their peak interest rate forecast for the ECB to 4%, up from 3.75% previously.

Attention will now turn to eurozone inflation data which is expected to confirm the preliminary reading of 6.1%, down from 7% in April.

Meanwhile, the pound has shown resilience this week after strong good than expected UK employment data and a rebound in economic activity in April.

Attention is now firmly on next week’s Bank of England interest rate decision, where the central bank is expected to raise interest rates by 25 basis points, a move which is not likely to be the last.

There is no high-impacting UK economic data today, leaving sentiment to drive the pound.