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Euro Pound (EUR/GBP) Exchange Rate Drops as Investors Await ECB Lagarde Speech

Euro Pound (EUR/GBP) Exchange Rate Weakens Ahead of ECB Lagarde Speech

The Euro Pound (EUR/GBP) exchange rate is edging lower today, as investors await a speech from European Central Bank (ECB) President Christine Lagarde.

At the time of writing, EUR/GBP is trading at around €0.8563, a drop of just under 0.2% from the morning’s opening rates.

Euro (EUR) Tepid as Markets Await ECB Speech

The Euro (EUR) is muted today, as a lack of data prevents the common currency from finding a clear direction.

Attention is likely shifting to a speech from European Central Bank President Christine Lagarde this afternoon. Markets are anticipating that Lagarde will maintain the ECB’s increasingly hawkish stance, and may advocate for a holding interest rates as is.

With the ECB firmly taking a data driven approach, the speech could serve to strengthen the Euro later in today’s trade. Beforehand, however, the Euro may remain quiet as investors anticipate the speech.

However, a mixed market mood may be serving to underpin the common currency today. Geo-political tensions in the Middle East have continued to flare, which may be pushing investors towards safer assets such as the Euro.

Pound (GBP) Wavers amid UK Recession Fears

The Pound (GBP) is treading water today, as concerns over the UK’s economic outlook continue to simmer.

Analysts have begun to weigh up whether or not the UK is in a technical recession following underwhelming GDP data.

Martin Beck, Chief Economic Advisor to the EY ITEM Club, stated there was a ‘good chance’ of one:

‘We know that GDP – gross domestic product – shrunk in the third quarter and looking at the high frequency numbers for Q4, there’s a good chance that it may have shrunk slightly again.’

However, Beck further forecast that the economy was likely to resume growth in Q4 2024. This perception could serve to cushion Sterling if it is shared amongst other analysts.

Euro Pound Exchange Rate Forecast: EU PMIs in Focus

Looking ahead for the Euro, the core catalyst of movement is likely to be the latest Eurozone PMIs, due Wednesday. In the Eurozone, both services and manufacturing sectors are expected to have improved in January.

However, both readings are forecast to remain in contraction, which may illustrate weak economic activity. This could weaken the common currency as investors remain concerned over the bloc’s economic outlook.

Similarly, the UK’s latest flash PMIs are due for publication on Wednesday. The UK service sector is forecast to have grown in January, which may strengthen Sterling against its peers.

Elsewhere, geo-political tensions are likely to weigh on the pairing. With conflict in the Middle East continuing to escalate, investors may favour the safer Euro over the Pound.