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EUR GBP Remains Subdued in Wake of ECB Minutes

The Euro Pound (EUR GBP) exchange rate remained below its best levels this morning as investors remain disappointed by the accounts from the latest ECB policy meeting

ECB Minutes Weigh on Euro (EUR) Sentiment

The Euro plummeted from a ten-month high against the Pound on Thursday as markets were disappointed by the minutes from the European Central Bank’s (ECB) July policy meeting.

With the Eurozone economy showing considerable growth in the first half of the year, markets had become increasingly hopeful that the ECB may have begun discussing the possibility of tightening its very accommodative monetary policy.

However investors were less disappointed as the minutes instead revealed that policy makers are growing concerned that the Euro may ‘overshoot’ in the future, with the strength of the single currency possibly hampering the bank’s efforts to increase inflationary pressures in the Eurozone.

Not all analysts were as concerned by the minutes however, with some suggesting that while the ECB stuck an extremely cautious tone in its July meeting that it may completely rule out the possibility of the bank discussing the winding down of its quantitative easing programme when it next meets in September.

Analysts at ING said;

‘Today’s minutes fit into the picture of an ECB which wants to steer and moderate the process towards tapering extremely cautiously. Yesterday’s reports that Mario Draghi would possibly not say anything new on the bank’s monetary policy at his speech at the Jackson Hole conference on 25 August had already given the same flavour.’

‘All of this means that in our view the ECB will take another baby step towards tapering at the September meeting.’

Pound (GBP) Pressured on Suggestions Brexit Trade Talks to be delayed

Meanwhile the Pound is struggling to hold on to its gains this morning following reports that ministers have privately admitted that Brexit trade talks are unlikely to get underway later this year.

UK officials had initially hoped that the second stage of Brexit negotiations, including trade talks would start in October, however those involved in the process have now suggested that this is unlikely to happen.

The cause of the delay appears to down to a lack of progress on the UK’s withdrawal agreement, which includes the settling of Britain’s ‘divorce bill’ and the outlining the rights of EU citizens living in the UK, with the EU previously saying that significant progress must be made before any talks of trade could begin.

EU leaders will meet at a summit in October to discuss whether enough progress has been made on these topics and whether trade talks can begin, with the Pound likely to plummet if the talks are delayed as it would leave very little time for negotiations before the end of official Brexit negotiations at the start of 2018.

EUR GBP Forecast: Eurozone PMI Figures Ahead

The EUR GBP exchange rate may cede some ground during next week’s trading session as economists forecast that the Eurozone’s PMI figures will have slipped in August, yet another hint that the bloc’s economic growth may have begun to slow in the second half of the year.

Meanwhile the Pound may also stumble late next week with the release of the UK’s latest GDP estimate, with Britain’s economy expected to have only grown by 0.3% in the second quarter.

Current Interbank Exchange Rates

At the time of writing the EUR GBP exchange rate was trending around 0.9111 and the GBP EUR exchange rate was trending around 1.0971.