{"id":4394,"date":"2018-03-09T00:00:00","date_gmt":"2018-03-09T05:00:00","guid":{"rendered":"https:\/\/currencylive.com\/100385-gbp-eur-cautious-ecb-tone\/"},"modified":"2018-03-09T00:00:00","modified_gmt":"2018-03-09T05:00:00","slug":"100385-gbp-eur-cautious-ecb-tone","status":"publish","type":"post","link":"https:\/\/currencylive.com\/news\/100385-gbp-eur-cautious-ecb-tone\/","title":{"rendered":"GBP\/EUR: Euro Drops vs. The Pound On Cautious ECB Tone"},"content":{"rendered":"<p>A cautious sounding European Central Bank President, Mario Draghi, pulled the euro lower on Thursday. The pound euro exchange rate hit a high of \u20ac1.1226 an increase of 0.2% on the day.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>What do these figures mean? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>\n<p> When measuring the value of a pair of currencies, one set equals 1 unit and the other shows the current equivalent. As the market moves, the amount will vary from minute to minute. <\/p>\n<p> For example, it could be written: <em>1 GBP = 1.13990 EUR<\/em> <\/p>\n<p> <em>Here, \u00a31 is equivalent to approximately \u20ac1.14. This specifically measures the pound\u2019s worth against the euro. If the euro amount increases in this pairing, it\u2019s positive for the pound.<\/em> <\/p>\n<p> Or, if you were looking at it the other way around: <em>1 EUR = 0.87271 GBP<\/em> <\/p>\n<p> <em>In this example, \u20ac1 is equivalent to approximately \u00a30.87. This measures the euro\u2019s worth versus the British pound. If the sterling number gets larger, it\u2019s good news for the euro.<\/em> <\/p>\n<\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>Sterling has struggled to make much ground this week as Brexit concerns are weighing on sentiment for the pound. Earlier in the week, the European Council Donald Tusk as good as rejected UK Prime Minister Theresa May\u2019s vision of a post Brexit EU-UK relationship. Instead Donald Tusk warned that the UK must lower its expectations.<\/p>\n<p>In the previous session the negative headlines continued to roll out. This time the EU announced a suspension to Brexit negotiations until a solution is found for the Irish border issue. With time ticking fears are increasing that a deal won\u2019t be completed in time. This would mean a hard Brexit could be on the cards.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why is a \u201csoft\u201d Brexit better for sterling than a \u201chard\u201d Brexit? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>A soft Brexit implies anything less than UK\u2019s complete withdrawal from the EU. For example, it could mean the UK retains some form of membership to the European Union single market in exchange for some free movement of people, i.e. immigration. This is considered more positive than a \u201chard\u201d Brexit, which is a full severance from the EU. The reason \u201csoft\u201d is considered more pound-friendly is because the economic impact would be lower. If there is less negative impact on the economy, foreign investors will continue to invest in the UK. As investment requires local currency, this increased demand for the pound then boosts its value. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>After a quiet week as far as the UK economic calendar is concerned, investors will be pleased to have a slight distraction from Brexit talks. Today sees a raft of economic data being released, including manufacturing numbers and trade balance figures.<\/p>\n<h2><a href=\"#ecb-s-draghi-pulls-euro-lower\" name=\"ecb-s-draghi-pulls-euro-lower\"><\/a>ECB\u2019s Draghi Pulls Euro Lower<\/h2>\n<p>The ECB made no changes to its monetary policy on Thursday. As analysts expected, the central bank kept interest rates constant at 0% and made no changes to its bond buying programme. The bank did, however, remove a pledge to increase bond buying if needed from its statement. This was seen as a step closer to removing stimulus measures in the eurozone, which is a step closer to increasing interest rates.<\/p>\n<table class=\"table table-bordered\">\n<thead>\n<tr>\n<th>Why do raised interest rates boost a currency\u2019s value? <\/th>\n<\/tr>\n<\/thead>\n<tbody>\n<tr>\n<td>Interest rates are key to understanding exchange rate movements. Those who have large sums of money to invest want the highest return on their investments. Higher interest rate environments tend to offer higher yields. So, if the interest rate or at least the interest rate expectation of a country is relatively higher compared to another, then it attracts more foreign capital investment. Large corporations and investors need local currency to invest. More local currency used then boosts the demand of that currency, pushing the value higher. <\/td>\n<\/tr>\n<\/tbody>\n<\/table class=\"table table-bordered\">\n<p>However, Draghi then gave a very cautious sounding press conference, whereby he reaffirmed the dovish stance on the central bank. Draghi continued to cite inflation as a problem in the eurozone and even downgraded inflation forecasts to just 1.4% in 2019, down from 1.5% previously. This means that inflation is forecast to still be significantly lower than the central banks 2% target rate. Interest rates are unlikely to be raised until the rate of inflation moves substantially higher. As a result, the euro fell.<\/p>\n<p>Today euro traders will be back watching economic data, with releases from Germany potentially causing some volatility before the weekend.<\/p>\n<table class=\"table table-bordered\">\n<tbody>\n<tr>\n<td>\n<p><small><em><br \/>\nThis publication is provided for general information purposes only and is not intended to cover every aspect of the topics with which it deals. It is not intended to amount to advice on which you should rely. You must obtain professional or specialist advice before taking, or refraining from, any action on the basis of the content in this publication. The information in this publication does not constitute legal, tax or other professional advice from TransferWise Inc., Currency Live or its affiliates. Prior results do not guarantee a similar outcome. We make no representations, warranties or guarantees, whether express or implied, that the content in the publication is accurate, complete or up to date. Consult our <a href=\"https:\/\/currencylive.com\/risk-warning\/\">risk warning<\/a> page for more details.<\/em><\/small><\/p>\n<p><small><em>This article was initially published on TransferWise.com from the same author. The content at Currency Live is the sole opinion of the authors and in no way reflects the views of TransferWise Inc.<\/em><\/small><\/p>\n","protected":false},"excerpt":{"rendered":"<p>A cautious sounding European Central Bank President, Mario Draghi, pulled the euro lower on Thursday. The pound euro exchange rate hit a high of \u20ac1.1226 an increase of 0.2% on the day. What do these figures mean? When measuring the value of a pair of currencies, one set equals 1 unit and the other shows [&hellip;]<\/p>\n","protected":false},"author":163946597,"featured_media":4395,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1380,1379],"tags":[1395,1394],"class_list":["post-4394","post","type-post","status-publish","format-standard","has-post-thumbnail","category-eur","category-gbp","tag-eur","tag-gbp"],"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v28.0 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>GBP\/EUR: Euro Drops vs. The Pound On Cautious ECB Tone - Currency Live<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/currencylive.com\/news\/100385-gbp-eur-cautious-ecb-tone\/\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"Fiona Cincotta\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"4 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\\\/\\\/schema.org\",\"@graph\":[{\"@type\":\"Article\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/#article\",\"isPartOf\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/\"},\"author\":{\"name\":\"Fiona Cincotta\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#\\\/schema\\\/person\\\/8ef0fafb6c93f1204150bb907b42cfec\"},\"headline\":\"GBP\\\/EUR: Euro Drops vs. The Pound On Cautious ECB Tone\",\"datePublished\":\"2018-03-09T05:00:00+00:00\",\"mainEntityOfPage\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/\"},\"wordCount\":860,\"image\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/#primaryimage\"},\"thumbnailUrl\":\"https:\\\/\\\/currencylive.com\\\/news\\\/wp-content\\\/uploads\\\/2019\\\/08\\\/100385-gbp-eur-cautious-ecb-tone.jpg\",\"keywords\":[\"eur\",\"gbp\"],\"articleSection\":[\"EUR\",\"GBP\"],\"inLanguage\":\"en-US\",\"copyrightYear\":\"2018\",\"copyrightHolder\":{\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/#organization\"}},{\"@type\":\"WebPage\",\"@id\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/\",\"url\":\"https:\\\/\\\/currencylive.com\\\/news\\\/100385-gbp-eur-cautious-ecb-tone\\\/\",\"name\":\"GBP\\\/EUR: Euro Drops vs. The Pound On Cautious ECB Tone - 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