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Euro pound (EUR/GBP) muted amid ECB dovish policymaker rhetoric

Pound to Euro Exchange Rate bank notes

Euro pound (EUR/GBP) rangebound amid central bank comments

The euro pound (EUR/GBP) exchange rate is trading without a clear direction this morning following dovish commentary from central bank policymakers. 

At the time of writing the EUR/GBP exchange rate is trading at €0.8559, virtually unchanged from this morning’s opening rate.         

Euro (EUR) subdued amid dovish ECB comments

The euro (EUR) is mostly quiet this morning following further dovish signals from the European Central Bank (ECB).

Following the ECB’s fifth consecutive interest rate hold last week, a dovish shift amongst senior policymakers has left the common currency on the backfoot in recent days.

Further commentary from ECB Vice President Luis de Guindos this morning has further reinforced market speculations that the central bank will begin to lower interest rates in June.

De Guindos reiterated the central bank’s most recent guidance, recalling that inflation in the Eurozone, which is currently at 2.4%, is steadily approaching the ECB’s target rate of 2%.

He noted that it would be ‘appropriate’ to begin loosening monetary policy, should upcoming data align with expectations. The notably dovish language used by the ECB official also echoed that of ECB President Christine Lagarde from the start of the week, indicating a united dovish consensus among policymakers.

De Guindos said:

‘I think that we have been crystal clear: if things continue as they have been evolving lately, in June we’ll be ready to reduce the restriction of our monetary policy stance.’

Elsewhere, expectations of divergence between ECB and Federal Reserve monetary policy in the coming months further stifles the euro against its major rivals.

Pound (GBP) muted as UK labour market cools

The pound (GBP) is flat against most of its peers this morning following talks of looser monetary policy from Bank of England (BoE) Governor, Andrew Bailey.

Despite a slightly warmer-than-forecast CPI reading yesterday, policymakers have seemingly shrugged off the marginal deviation, affirming that inflation remains on a downward trajectory.

 Speaking at a conference in Washington, Bailey said:

‘We are pretty much on track with where we thought we would be – a bit under in February and a bit over in the latest figures. Next month will see quite a strong drop. It looks like we are getting a loosening of the labour market.’

Suggestions that the UK inflation will likely show a ‘strong drop’ this month alongside assertions that the central bank’s approach to monetary loosening is highly dependent on inflationary trends reinforced market expectations that interest rates will be cut in June.

As such, the pound may struggle to gain ground against its rivals as the session progresses.

Euro pound exchange rate forecast: eyes on UK retail data

Coming up, the UK’s latest retail sales data is due for release tomorrow. Retail sales are forecast to have risen by 0.3% in March, following a flat reading in the month prior. Should the data align with expectations, increased consumer activity may serve to lift the pound, indicating that cost-of-living pressures are beginning to ease in the UK.

For the euro, Germany’s latest producer price index (PPI) is due for release. Forecast to flatline following last month’s 0.4% contraction, stagnant inflationary pressures may deter investor interest in the common currency.