Euro stumbles to one-week low ahead of ECB rate decision

The euro fell back to a one-week low against the US dollar on Wednesday, as investors braced for the European Central Bank’s (ECB) upcoming interest rate decision.

Meanwhile, the pound is mostly rangebound so far this morning, with GBP/EUR flat at €1.1652 and GBP/USD muted at $1.3774. GBP/CAD has climbed to CA$1.7526, while GBP/AUD and GBP/NZD hold steady at AU$1.8705 and NZ$1.9405 respectively.

All eyes will be on the ECB today as it concludes its latest policy meeting. Will a dovish outlook from the bank send the euro even lower?

What’s been happening?

The euro was placed on the defensive yesterday, as some mixed messages from European Central Bank (ECB) policymakers, unnerved EUR investors ahead of the bank’s interest rate decision later this afternoon.

Whilst the ECB’s Robert Holzmann suggested the bank could start to ‘normalise monetary policy sooner than most financial market experts expect’, his colleague, Bostjan Vasle struck a more cautious tone, warning that a ‘highly accommodative’ monetary policy is still necessary.

Meanwhile, the US dollar trended broadly higher on Wednesday, with the safe-haven currency attracting support amidst a souring market mood.

This upside in the ‘greenback’ was then reinforced with the release of the latest US JOLTs job opening figures, as adverts for new staff soared to a record high in July.

At the same time, the pound was mostly muted through yesterday’s trading session as it continued to be undermined by tax hike and Brexit concerns.

What’s coming up?

Top of the agenda today will undoubtedly be the delivery of the ECB’s latest interest rate decision later this afternoon.

The current consensus is that the ECB will opt to leave its monetary policy untouched this month, whilst striking a dovish tone with its forward guidance, which could result in the euro weakening today.

In the meantime, the pound could struggle in the face of some political uncertainty today, amidst reports Boris Johnson is preparing to execute a cabinet reshuffle.

Across the pond, the US dollar may be able to extend its gains with the publication of latest week’s initial jobless claims, which are forecast to have fallen again in the first week of August.