Will the euro rise or fall on today’s ECB decision?

With little domestic stimulus to motivate the pound, GBP exchange rates spent Wednesday responding to news from elsewhere.

Ahead of the ECB rate decision, the GBP/EUR exchange rate is trading around €1.0925, GBP/USD is close to a one-month high at $1.3042, GBP/AUD has strengthened to AU$1.6320, GBP/NZD has advanced to NZ$1.8155, but GBP/CAD is still trading substantially lower at C$1.5931.

So, what news should you be focusing on today? Keep reading to find out…

What’s been happening?

A decided lack of UK news meant the pound spent Wednesday drifting around in response to external developments.

GBP/EUR was left trending in a narrow range ahead of today’s European Central Bank (ECB) interest rate announcement, while GBP/USD was able to brush monthly highs on the back of less-than-impressive US news.

GBP/CAD tumbled dramatically during the afternoon after the Bank of Canada (BOC) delivered a surprise interest rate hike, but the pound was able to strengthen against the Australian dollar as Aussie construction output and trade balance figures missed the mark.

The AiG Performance of Construction Index tumbled from 60.5 to 55.3 in August, while the national trade surplus narrowed unexpectedly.

What's coming up?

Without doubt the biggest news item on the calendar today is the European Central Bank’s (ECB) interest rate decision.

Whether or not the euro climbs or falls on the announcement depends on the approach policymakers take to the tapering of quantitative easing. Any confirmation that QE will soon be tapered will be euro-supportive.

However, according to Lloyds Bank; ‘With a broadening of the economic recovery and diminished deflation risks in the Eurozone, policymakers are expected to have started discussing the orientation of future stimulus measures beyond the end of this year. However, we anticipate no decision will be announced until the October meeting at the earliest and it could be as late as the final meeting of the year in December. Hence, key interest rates, asset purchases at €60bn a month until the end of the year and forward guidance are all expected to be left unchanged.’

If forward guidance is indeed unchanged the GBP/EUR exchange rate could climb this afternoon.

We’re here to talk currency whenever you need us, so get in touch if you want to know more about the latest news or how it could impact your currency transfers.

Phil McHugh,
Trading Floor Manager

Phil provides dealing and hedging services whilst also helping to manage Currencies Direct overall market exposure.