GBP/EUR soars as ECB leaves monetary policy unchanged

The pound strengthened on Thursday, in particular against the euro which was weakened by the European Central Bank’s (ECB) decision to leave interest rates on hold again in April.

Sterling appears to be consolidating this morning, with GBP/EUR flat at €1.1511, GBP/USD trading narrowly at $1.3905 and GBP/CAD muted at C$1.7923. Meanwhile GBP/AUD and GBP/NZD are both holding steady at AU$1.8439 and NZ$1.9729 respectively.

The UK will publish its first quarter GDP figures this morning, with the pound likely to nosedive if UK growth has slowed, as some expect…

What’s been happening?

The pound ticked higher on Thursday, as some robust mortgage approval data helped to offset a report suggesting that retail activity remained subdued in April.

The GBP/EUR exchange rate soared on Thursday as investors reacted to the ECB’s latest rate decision.
Unsurprisingly the bank again voted to leave its monetary policy unchanged this month.

While Mario Draghi struck a more upbeat tone in his following statement, hailing the ‘solid’ growth in the Eurozone, the ECB President’s remarks failed to bolster hopes that he is any closer to discussing its next rate hike.

Meanwhile the GBP/USD exchange rate’s attempts to advance yesterday were curtailed by the release of the latest US durable goods order figures.

The data revealed that order growth slowed by a much more modest pace than expected in March, with the robust reading helping to buoy hopes of a more hawkish Federal Reserve this year.

What’s coming up?

The pound is likely to slide today as the UK’s latest GDP figures are expected to show UK economic growth slowed at the start of 2018.

Economists forecast that a run of soft data from the UK over the last three months will see GDP slow from 0.4% to 0.3% or even as low as 0.2% in the first quarter.

This in turn may further dampen the case for the Bank of England (BoE) to raise interest rates next month, which will be to the dismay of GBP investors.

The euro may look to recoup some of Thursday’s losses today with another strong labour report from Germany possibly going some way towards helping the single currency to rally.

The US dollar meanwhile is likely to face a similar fate to the pound today with as the US releases its own first quarter GDP figures, with growth forecast to have slowed from 2.9% to 2% at the start of the year.