Pound Euro (GBP/EUR) Exchange Rate Flat as ECB Leaves Door Open to Future Rate Cuts
The Pound Sterling Euro (GBP/EUR) exchange rate remained muted and the pairing is currently trading at an inter-bank rate of €1.1164.
On Thursday, the European Central Bank (ECB) left rates unchanged but opened the door to interest rate cuts.
The decision to leave rates unchanged likely provided the single currency with a bout of relief as many investors priced in a cut.
However, the bank turned dovish causing the Euro to be left muted against Sterling.
The bank stated it believed rates would be at the current or a lower level through till mid-2020.
This meant the bank gave up its previous pledge to keep rates unchanged until June 2020.
Reuters reported that following the meeting, ECB officials stated an interest rate cut in September ‘appeared certain’.
Draghi: Eurozone Outlook ‘Getting Worse and Worse’
Meanwhile, on Thursday afternoon following the ECB’s rate decision, the bank’s President Mario Draghi spoke at a news conference.
During the conference, Draghi noted that the outlook for the bank is ‘getting worse and worse’.
He noted that this ‘mainly reflects the ongoing weakness in international trade in an environment of prolonged global uncertainties, which are particularly affecting the euro are manufacturing sector.’
Dampening Euro sentiment, he stated the once hoped-for rebound in 2019 for the Eurozone was becoming ‘less likely’.
Sterling (GBP) Left Flat as Boris Johnson Promises a New ‘Golden Age’
Sterling edged up against a handful of currencies as Boris Johnson became the UK’s new Prime Minister.
Reports suggested that on his second day as PM he continued his reshuffle of the government.
In his first Commons speech, Johnson promised his premiership would be the beginning of a new ‘golden age’.
The probability of a Brexit no-deal increased as the new Prime Minister vowed the UK would leave the EU on 31 October.
However, Boris Johnson’s victory was largely priced into the Pound which has lost over 5% of its value since May.
The GBP/EUR exchange rate even hit a six-month low earlier this month.
Commenting on this small recovery, Marshall Gittler, Currencies Analyst at ACLS Global said:
‘Sentiment towards the Pound doesn’t seem to have improved – on the contrary, three-month risk reversals continued to decline, showing that people are getting increasingly negative on the currency.
‘So I believe this is just a temporary respite and I remain long-term bearish on GBP.’
Pound Euro Outlook: Will Disappointing German Inflation Weigh on EUR?
Looking ahead to the start of next week, the Euro (EUR) could edge up against the Pound (GBP) following the release of the French Q2 GDP on Tuesday.
If France’s economic growth is stronger than expected during the three months to June it could provide the single currency with an upswing of support.
Meanwhile, the Euro could slide in the afternoon following the release of the German Consumer Price Index (CPI).
If July’s inflation does not rise as high as expected, the Pound Euro (GBP/EUR) exchange rate could rise.
