Pound euro exchange rate slides as Draghi strikes confident tone following ECB meeting
Philip McHugh October 26th 2018 - 2 minute read
The pound came under renewed pressure on Thursday, with the UK currency shunned by markets in favour of the euro in the wake of the European Central Bank’s (ECB) latest policy meeting.
While Sterling remains rangebound against the euro and US dollar this morning, with GBP/EUR steady at €1.1262, GBP/USD flat at $1.2815, it is moving higher against its more risk sensitive peers, with GBP/CAD jumping to C$1.6840 and GBP/AUD and GBP/NZD both gaining, as they strike AU$1.8222 and NZ$1.9790 respectively.
Looking ahead, all eyes will be on the US dollar this afternoon, with the currency potentially weakening if US growth slows as expected in the third quarter.
What’s been happening?
The GBP/EUR exchange rate closed on a monthly low during Thursday’s trading session, as markets digested the European Central Bank’s (ECB) latest rate decision.
While the bank may have chosen to leave interest rates on hold this month, a confident outlook from ECB President Mario Draghi was still able to ignite demand for the euro yesterday, with the currency being particularly buoyed by the ECB head’s upbeat inflation outlook and dismissal of those Italy budget fears.
These losses in GBP/EUR where further exacerbated by broad weakness in the pound yesterday, with lingering Brexit uncertainties continuing to drag on Sterling sentiment.
The weakness in the pound saw it susceptible to further losses against the US dollar as well, with the GBP/USD exchange rate touching a fresh six-week low yesterday afternoon as US durable goods orders printed higher than expected in September.
What’s coming up?
The US economy will be in the spotlight this afternoon as markets eagerly await the release of the latest US GDP figures.
Today’s estimate will provide investors with their first look at whether the bumper growth seen in the second quarter will have carried over to the September quarter, with the US dollar potentially weakening if growth slowed as forecast.
Meanwhile the considerable downside risks to the pound may continue to put the kibosh on any attempts by the UK currency to move higher unless some positive progress in Brexit talks begins to emerge.
Finally, the euro may also struggle to advance today, with a lull in data following this morning’s German consumer confidence figure providing the single currency with limited scope for movement.