Euro spikes on hawkish ECB comments

The euro briefly surged on Thursday, rallying on the back of some hawkish comments from a European Central Bank (ECB) policymaker.

Meanwhile, the pound opens today’s session on the defensive, with GBP/EUR sliding to €1.1973 and GBP/USD plummeting to $1.2955. GBP/CAD has dipped to C$1.6353, while GBP/AUD and GBP/NZD hold steady at AU$1.7710 and NZ$1.9375, respectively.

Looking ahead, will some cautious comments from the Bank of England’s (BoE) Andrew Bailey further weigh on GBP exchange rates today?

What’s been happening?

The euro stormed out of the gates yesterday, with EUR investors seizing on comments by European Central Bank Vice President Luis de Guindos, who suggested an interest rate hike in July is ‘possible’.

However, the single currency was unable to stabilise at its best levels, with the euro relinquishing most of its gains by the end of the European trading session.

The US dollar, meanwhile, initially stumbled on Thursday, before rallying in response to rising US Treasury yields and an easing of market risk appetite.

At the same time, the pound struggled to find support in the wake of some dovish comments from Bank of England policymaker Catherine L Mann.

What’s coming up?

Kicking off today’s session was the publication of the UK’s latest retail sales figures, where a larger-than-expected contraction of sales growth in March has already begun to exert significant pressure on the pound.

Sterling also looks be influenced by the UK’s upcoming PMI releases. Could a robust services PMI help to revive Sterling sentiment?

However, the most important catalyst for the pound may be BoE Governor, Andrew Bailey’s speech later this afternoon, where a cautious outlook could prompt GBP exchange rates to tumble.

The Eurozone’s own PMI releases will be a key focus for EUR investors this morning, amidst concerns over the impact the war in Ukraine will have had on economic activity in the bloc.

However, a speech by ECB President Christine Lagarde may prove more impactful, especially if she appears in anyway supportive of calls for earlier monetary tightening.

Finally, while the S&P PMIs are not as influential as the ISM releases, this afternoon’s US PMIs could provide direction to the US dollar, with the ‘greenback’ potentially weakening if they undershoot expectations.