GBP/EUR: Brexit & Eurozone CPI To Drive Trading Into The Weekend
  • Pound (GBP) holds steady in quiet trade
  • BoE rate decision is next week
  • Euro (EUR) falls ahead of the ECB rate decision
  • ECB to hike by 25 bps

The Pound Euro (GBP/EUR) exchange rate is rising for a fourth straight session. The pair rose +0.03% yesterday, settling on Wednesday at €1.1670 and trading in a range between €1.1668 – €1.1681. At 06:35 UTC, GBP/EUR trades +0.04% at €1.1675.

The euro traded quietly in the previous session as investors sat on the sideline ahead of today’s ECB central bank decision. The ECB is expected to raise rates by 25 basis points taking the main interest rate to 3.75% after ECB president Christine Lagarde clearly signaled in the June meeting that a rate hike would be coming in July. However, what is less clear is what the ECB will do in September.

Heading towards the meeting, there have been some conflicting signals. ECB hawk Klass Knot said in July that hikes beyond July were not a certainty. Eurozone PMI prints this week could also be a cause for concern for the ECB.

However, ECB’s Nagel and Simkus both said it would be a mistake to cut interest rates too soon and wouldn’t be surprised if the ECB hikes again in September.

The market had been confident of another 25 basis point hike in September however those expectations have dwindled this week. ECB president Christine Lagarde was very hawkish at the June meeting. Investors will be listening closely to her tone today for any clues as to when the ECB could end its hiking cycle.

The pound held steady in the previous session amid a lack of fresh fundamental drivers. This week has been a quiet week on the UK economic calendar. With the exception of PMI data at the start of the week, the calendar has been relatively empty.

Attention is starting to turn to the BoE rate decision next week, where the central bank is set to raise interest rates again. The market is leaning towards a 25 basis point hike after inflation cooled by more than expected last week.