GBP/EUR rebounds to €1.16 ahead of ECB rate decision

The pound rallied on Wednesday, with the currency recovering a good portion of its earlier losses this week.

Sterling appears to be consolidating these gains so far this morning, with GBP/EUR buoyed at €1.1652 and GBP/USD accelerating to $1.3748. GBP/CAD has climbed to C$1.7286, while GBP/AUD and GBP/NZD hold steady at AU$1.8646 and NZ$1.9745 respectively.

Coming up, all eye will be on the European Central Bank (ECB) today as it delivers its latest rate decision.
 

What’s been happening?

The pound mounted a convincing recovery during yesterday’s European trading session.

There was no clear catalyst for the upswing, suggesting that it was driven by investors looking to pick up a bargain, following a sharp drop in GBP exchange rates through the first half of the week.

However, Sterling’s recovery was tempered somewhat by fresh Brexit jitters, as UK's chief Brexit negotiator, David Frost outlined the government’s plans to rewrite the Northern Ireland protocol.

The US dollar, meanwhile, relinquished some of its recent gains on Wednesday, as an improving market mood sapped demand for the safe-haven currency, although this pullback in the ‘greenback’ was capped by rising US Treasury yields.

At the same time, the euro struggled to attract support yesterday, as investors remained wary of the single currency ahead of the ECB’s latest rate decision.
 

What’s coming up?

Top of the agenda today will be the conclusion of the European Central Bank’s July policy meeting.

This will be the ECB’s first policy decision since it adopted a new inflation target following a strategy review earlier this month.

ECB President Christine Lagarde previously hinted that the bank may change its forward guidance to reflect its new inflation mandate, which could infuse some significant volatility into the euro later this afternoon.

In the meantime, the Confederation of British Industry (CBI) will publish its latest industrial trend orders index later this morning, which could help to extend the pound’s recovery if it prints above expectations in July.

On the other side of the pond, the focus for USD investors will be on the latest US initial jobless claims. Will another drop in new claims last week, offer fresh support for the US dollar this afternoon?