GBP/EUR exchange rate climbs above €1.17 on dovish ECB

The euro fell across the board on Thursday, following the European Central Bank’s (ECB) latest interest rate decision.

Meanwhile, the pound is mostly rangebound so far this morning, with GBP/EUR flat at €1.1706 and GBP/USD stable at $1.3858. GBP/CAD is muted at to CA$1.7510, while GBP/AUD and GBP/NZD dip to AU$1.8763 and NZ$1.9430 respectively.

Looking ahead, could Sterling struggle to attract support today, following the publication of an underwhelming UK GDP release?

What’s been happening?

The euro retreated during yesterday’s trading session, as investors digested the ECB’s latest policy statement.

While the ECB opted to leave interest rates on hold again this month, its announced that it will start slowing the pace of its pandemic emergency purchase programme (PEPP) after judging that ‘favourable financing conditions can be maintained’ at a ‘moderately lower’ pace.

Despite the ECB also lifting its inflation and growth forecasts, the euro retreated yesterday as ECB president Christine Lagarde made it clear that the reduction in its PEPP does not constitute a tapering of its bond-buying programme.

The US dollar also trended lower through Thursday’s session, as the appeal of the safe-haven currency was diminished by a bullish market mood, which was particularly attributed to the latest US jobless claims, as they fell to a new post-pandemic low.

Meanwhile, despite no clear catalyst the pound enjoyed strong support yesterday, making strong gains against a weakened euro and US dollar.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest GDP figures.

Their release has left the pound struggling to attract support this morning, after revealing economic growth in July was almost non-existent, despite more of the UK economy opening back up.

At the same time, the euro looks to potentially claw back some of yesterday’s losses, as Germany’s latest consumer price index confirms inflation in the Eurozone’s largest economy accelerated to an 18-year high last month.

Finally in the absence of any notable USD data releases, the direction of the US dollar is likely to be dictated by market sentiment, potentially allowing the ‘greenback’ to retreat further if a risk-on mood continues to prevail.