- Pound (GBP) holds steady amid a quiet economic calendar
- UK GDP stalled in July
- Euro (EUR) awaits the ECB rate decision
- ECB is expected to cut rates by 25 bps
The Pound Euro (GBP/EUR) exchange rate is holding steady after losses yesterday. The pair fell -0.23% in the previous session, settling on Wednesday at €1.1841 and trading in a range between €1.1813 and €1.1884. At 11:00 UTC, GBP/EUR trades -0.02% at €1.1842.
The euro is holding steady as investors await the latest ECB interest rate decision, which will be announced at 12:15 GMT.
Expectations are for the ECB to resume its rate-cutting cycle, reducing rates by 25 basis points to 3.5% after cutting for the first time in four years in the June meeting.
The rate decision comes as inflation in the euro area eased to a three-year low of 2.2% year over year in August, and the latest data points to signs of the economy slowing.
As the ECB is expected to cut interest rates, the focus will instead be on updated staff projections and forward guidance from the ECB governor Christine Lagarde.
Recent euro area data has been broadly weaker than expected, which may result in the ECB’s downward revision of its growth projections.
The central bank is unlikely to offer formal forward guidance regarding further rate cuts and is expected to stick to its “data-dependent” position.
The market expects the ECB to cut interest rates by 67 basis points throughout the rest of the year, with a 25-basis-point cut expected in September and another in December.
A dovish-sounding ECB could raise rate cut expectations for the coming months and pull the euro lower.
The pound is holding steady amid a quiet economic calendar, and investors continue to digest data from earlier in the week.
Figures yesterday showed the UK’s economic growth stalled in July, defying expectations of a higher move.
Meanwhile, labour market data earlier in the week was mixed. Unemployment and job creation showed improvement, while wage growth slowed, pointing to easing pricing pressures.
Looking ahead, the calendar remains quiet for the rest of the week, meaning that sentiment will likely drive GBP.
