The Pound-Euro rate could stay rangebound ahead of the ECB decision, with Sterling also likely to remain subdued before Friday’s UK GDP data.
The Pound Euro (GBP/EUR) exchange rate wavered mostly sideways on Wednesday as markets awaited the European Central Bank’s (ECB) interest rate decision.
At the time of writing, GBP/EUR was trading at €1.1641, virtually unchanged on the day.
DAILY RECAP:
The Euro (EUR) traded in a narrow range on Wednesday as EUR investors braced for the European Central Bank’s interest rate decision on Thursday.
In addition, a lack of Eurozone economic data also muted movement in the common currency, while political and geopolitical European angst kept a lid on EUR.
Concerns about escalating tensions between Europe and Russia, as well as political discontent in Germany, seemed to stifle the Euro’s upside potential.
Meanwhile, the Pound (GBP) was also subdued on Wednesday as British economic data remained hard to come by.
Bond market movements also failed to offer Sterling a direction. Gilt yields edged back up after wavering on Tuesday, although they remained below the highs hit last week.
Near-Term GBP/EUR Forecast: ECB Decision in the Spotlight
Looking forward, the ECB’s interest rate decision is in the spotlight on Thursday. With a 25-basis-point rate hike fully priced in, investors will likely focus on the bank’s accompanying forward guidance.
Markets have been expecting a hawkish tone from the ECB, as Eurozone inflation remains well above target, which could lift the Euro.
However, these expectations could also set EUR up for a fall. Some analysts speculate that the ECB may strike a more dovish chord following the recent turmoil in bond markets across Europe, as rising bond yields have already led to tighter conditions, easing pressure on the ECB to hike rates. If so, the single currency could slide.
As for the Pound, UK economic data remains thin on the ground, potentially limiting Sterling’s movement. GBP investors will likely want to refrain from placing any aggressive bets ahead of the British GDP figures on Friday.
That said, domestic headlines and bond market movements could still influence Sterling.
Our currency coverage draws on live market data, official economic releases and published bank research.
