Euro Pound (EUR/GBP) Exchange Rate Narrows despite Hawkish ECB Rhetoric
The Euro Pound (EUR/GBP) exchange rate is trading within narrow boundaries today, despite hawkish remarks from European Central Bank (ECB) Chief Economist Philip Lane.
At the time of writing, EUR/GBP is trading at around £0.8668, showing little movement from the morning’s opening rates.
Euro (EUR) Lifted by Hawkish ECB Remarks
The Euro (EUR) is enjoying modest success today, following hawkish comments earlier in the session from ECB Chief Economist Philip Lane.
In a speech given at a Lithuanian conference, Lane walked through the many remaining inflationary pressures.
‘Services inflation is now a big contributor. Food inflation is still a substantial issue. We don’t expect the current low gas price to be maintained. Services are very connected to the energy sector. We are not yet at the inflation target, more work needs to be done. Domestic inflation shows there remains pressure coming from wages. We still have two more years of fairly large wage rises.’
However, additional tightening bets were likely offset during the session by persistent strength in the US Dollar (USD).
As the Euro shares a negative correlation with the ‘Greenback’, its strength during today’s trade likely served to undermine EUR rates.
Pound (GBP) Mixed amid Light Data Calendar
The Pound (GBP) is trading in a mixed capacity today, as a lack of data leaves the currency to trade in line with wider market dynamics.
Because of this, Sterling is gaining ground against more risk sensitive peers, such as the Australian Dollar (AUD), but remaining flat against safer currencies.
Similarly, the lack of other impetus kept recent downbeat news about the UK economy in focus for investors. Recent releases have shown growing economic woes throughout the country, and some economists are anticipating an imminent recession.
The downbeat outlook is prompting investors to readjust their bets on further tightening from the Bank of England (BoE). The consensus is shifting towards the BoE’s recent hike being the final one in its current tightening cycle.
Euro Pound Exchange Rate Forecast: ECB Lagarde Speech in Focus
Looking ahead for the Euro, the core catalyst of movement is likely to be a speech from European Central Bank President Christine Lagarde.
Tomorrow, if she follows along from Lane’s speech today, the Euro could strengthen amid renewed bets on further tightening. However, if Lagarde strikes a more dovish tone, the common currency could weaken.
This is followed by the publication of August’s retail sales data. On a monthly basis, sales are forecast to have shrunk by 0.3%.
If this prints in line with economist’s expectations, EUR may weaken against its peers amid signs of struggle in the sector.
For the Pound, tomorrow brings the publication of the final services PMI reading for September. If this confirms further contractions in the key sector, Sterling will likely weaken against its peers.
Elsewhere, risk appetite is likely to remain a key driver of movement for the pairing. If the market mood remains downbeat, EUR/GBP could strengthen due to the Euro’s safer stature.