Euro struggles amid dovish ECB remarks

The euro slipped against its peers on Monday, following dovish comments from a European Central Bank (ECB) policymaker.

So far, the pound is ticking higher this morning, with GBP/EUR firming at €1.1745 while GBP/USD is rangebound at $1.264. GBP/CAD is wavering at CA$1.7020, while GBP/AUD is rising at AU$1.9407, with GBP/NZD similarly strengthening at NZ$2.0367.

Looking ahead, will an expected cooling of US inflation dent the US dollar later this afternoon?

What’s been happening?

Monday saw the euro struggle to attract support, following dovish comments from European Central Bank policymaker Fabio Panetta.

Panetta indicated that interest rate cuts were ‘fast approaching’, furthering bets that the ECB will soon begin to unwind its monetary policy.

The pound, meanwhile, traded without clear direction during yesterday’s session, amid a lack of impactful data.

However, analysis from Goldman Sachs may have pressured Sterling towards the end of the European session. The US bank weighed up the effects of Brexit on British trade, suggesting the UK is still suffering from it.

Elsewhere, the US dollar similarly remained muted over the course of the session, owing to a short supply of data.

What’s coming up?

Looking ahead, the latest UK labour data is likely to support the pound today.

Average earnings excluding bonuses cooled less than expected in January, printing at 6.2% as opposed to forecasts it would fall to 6%. Additionally, unemployment unexpectedly fell in January from 3.9% to 3.8%.

This undermined Bank of England (BoE) interest rate cut expectations and is helping to boost Sterling.

In focus for USD investors is the latest US inflation data. In January, both core and headline inflation rates are expected to have cooled, which could increase bets on imminent interest rate cuts from the Federal Reserve.

Elsewhere, the euro may rally on the back of Germany’s latest ZEW economic sentiment index. Confidence is anticipated to have increased in February.