Euro pound (EUR/GBP) fluctuates ahead of central bank commentary
The euro pound (EUR/GBP) exchange rate is changeable this morning amid a data-light start to the session.
At the time of writing the EUR/GBP exchange rate is trading at €0.8579, virtually unchanged from this morning’s opening rate.
Euro (EUR) wavers following ECB outlook
The euro (EUR) is struggling to attract investor support this morning amid a lack of fresh Eurozone data.
In the absence of macroeconomic releases, the latest outlooks from the European Central Bank (ECB) leave the common currency on the defensive. In its latest Financial Stability Review, the central bank cautioned against the elevated economic and inflationary risks posed by ongoing geopolitical tensions.
ECB Vice President Luis de Guindos, said:
‘Policy uncertainty remains high around the world in a year featuring so many major elections. In such an environment, the scope for adverse economic and financial surprises is elevated, and the risk outlook for euro area financial stability remains fragile accordingly.’
The near-term risk of a deep recession accompanied by rising unemployment – a major source of concern six months ago – is much lower from today’s perspective, and disinflation has proceeded in parallel.’
Pound (GBP) muted prior to BoE speech
The pound (GBP) is trading without a clear direction this morning with fresh UK releases in short supply.
In turn, a data-light session leaves GBP looking ahead to upcoming Bank of England (BoE) commentary, seemingly reluctant to place any aggressive bets on Sterling in the meantime.
As markets continue to mull over the likelihood of a June interest rate cut, amid an increasingly muddied outlook regarding the timing of the BoE’s unwinding cycle, any accommodative signals from policymaker Megan Greene could bolster market speculations that the central bank is shifting towards a more dovish consensus, as it prepares to begin lowering its base rate next month.
Speaking on the likelihood of summer rate cuts, BoE Chief Economist Huw Pill most recently said:
‘I think it’s not unreasonable to believe that through the summer we will begin to see enough confidence in the decline in persistence that Bank Rate will come into consideration.’
However, due to Greene’s typically hawkish approach towards monetary policy, any push back against imminent BOE rate cuts could see the pound post some marginal gains.
Euro pound exchange rate forecast: central bank commentary in focus
Looking ahead, the BoE’s most hawkish policymaker, Catherine Mann is due to speak on Friday morning. Should Mann continue to advocate for restrictive monetary policy, Sterling could climb against its peers amid signs that the central bank may continue to favour higher interest rates in the coming months.
Also due to speak is ECB Vie President Luis de Guindos. Guindos has frequently struck dovish in recent weeks, affirming market expectations that the central bank could lower its base rate in June. Further talks of monetary loosening in the Eurozone may see the common currency slump against its rivals, reinforcing ECB rate cut bets.
