Euro buoyed as ECB avoids cutting rates this month

Philip McHugh July 26th 2019 - 2 minute read

The euro was centre stage yesterday, with the single currency accelerating following the European Central Bank’s (ECB) latest policy meeting.

Turning towards the pound this morning, the UK currency is mostly rangebound, with GBP/EUR flat at €1.1159, GBP/USD subdued at $1.2429 and GBP/CAD stable at C$1.6373. GBP/AUD and GBP/NZD are both holding steady at AU$1.7922 and NZ$1.8686 respectively.

Coming up today we have the publication of the latest US GDP figures. The report may see the US dollar trend lower this afternoon if US economic growth is confirmed to have cooled in the second quarter.

What’s been happening?

While the ECB rate decision may have been lacking in surprises yesterday, with the bank keeping rates on hold and signalling some potential easing in September, the euro was able to trend broadly higher thanks to some choice comments from ECB President Mario Draghi.

EUR exchange rates strengthened as Draghi stated that the ECB’s governing council didn’t discuss cutting rates this month. He also struck a more confident tone than expected as he said that the bank believes the risk of a recession in the Eurozone is pretty low.

For GBP investors the focus remained firmly on UK political headlines as Boris Johnson made his first statement as PM in the House of Commons.

Whilst Johnson remained clear that he was committed to leaving the EU in October, markets appeared to keep their cool, with the pound even briefly accelerating on Johnson’s suggestion that the UK is more prepared for a no-deal Brexit than many believe.

Meanwhile, the US dollar was left muted yesterday after a stronger-than-expected rebound in US durable goods orders in June was undermined by May’s reading being revised sharply lower.

What’s coming up?

The main catalyst of movement in currency markets today will be the latest US GDP figures, published later this afternoon.

This may see the US dollar trend lower today as economists forecast that economic growth in the US economy will have slowed quite notably in the second quarter.

Meanwhile, the pound is likely to remain sensitive to UK political developments on Friday, as markets wait to see how Johnson plans to go about renegotiating the EU withdrawal deal.

Finally, expect the euro to remain broadly flat at the end of this week’s session as a lull in notable Eurozone data leaves EUR investors to digest the ECB’s policy decision.
 

Written by
Philip McHugh

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