Euro fluctuates as ECB accounts indicate support for faster policy normalisation

The euro wavered on Thursday, rising on the back of some surprisingly hawkish minutes from the European Central Bank’s (ECB) March policy meeting, before quickly shedding these gains.

Meanwhile, the pound opens today’s session on the back foot, with GBP/EUR dipping to €1.2008 and GBP/USD sliding to $1.3043. GBP/CAD has stumbled to C$1.6412, while GBP/AUD and GBP/NZD are muted at AU$1.7437 and NZ$1.8962, respectively.

Looking ahead, a lull in notable data leaves Ukraine developments to drive currency movements today.

What’s been happening?

The euro received a shot in the arm yesterday, following the publication of the meeting accounts from the European Central Bank’s March policy meeting.

The accounts revealed there is appetite within the bank to speed up its policy normalisation amidst predictions inflation will remain above target through 2023, with some policymakers arguing that ‘for all practical purposes, the three forward guidance conditions have been met’.

However, the euro was unable to hold on to these gains for long, with the single currency being pressured by a rebound in the US dollar.

After also facing an early setback as a result of softening US Treasury yields, the US dollar was able to rally late on Thursday amid a risk-off mood and on the back of data which showed US jobless claims fell to a 50-year low last week.

Meanwhile, the pound was left mostly rangebound through yesterday’s European session as UK data was thin on the ground and GBP investors remained worried by recent warnings from Deutsche Bank that the UK could be headed toward a recession as a result of the cost of living crisis.

What’s coming up?

The absence of any high-impact data at the end of this week is likely to result in events in Ukraine playing a more influential role in shaping the currency market this week.

This could see pound and euro unsettled amid concerns that peace talks between Ukraine and Russia are showing little to no progress as a prolonged conflict will further disrupt the UK and Eurozone economies.

On the other hand, a broadly risk-off mood could see investors favour the safe-haven US dollar.