Euro to Pound outlook: European Central Bank considers interest rate cut, where to next for EUR/GBP exchange rates?

General Election could weaken Sterling

The pound to euro exchange rates have been experiencing increasing volatility since the end of July. The rate of 1.064 has been the lowest at August 10th, whilst at the highest it has hit 1.1224. With Parliament suspended for now, what will lie ahead to move the market?

Potential ECB interest rate cut: How could a cut influence GBP/EUR exchange rates?

Today, is the latest ECB (European Central Bank) interest rate decision which has a higher level of importance than usual. This is because the ECB, the central bank of the Eurozone, are expected to provide some further information regarding the potential for interest rate cuts. Changes in the monetary policy of a central bank can often have an influence on the currency concerned.

Generally, a higher interest rate attracts investment and makes a currency stronger, whilst a lower rate weakens the currency by making it less attractive to hold. There is an expectation of some action by the ECB which may in principle suggest weakness. However, there are no guarantees, and much of the commentary around the meeting suggests the ECB could disappoint the market.

When we consider the last year has seen 11 cents movement between the high and the low (1.0647 – 1.1763), to have had 6 cents movement in 1 month does represent an increase in the previous existing behaviour on the pairing.

Highest Pound to Euro exchange for 6 weeks

Clients looking to buy euros are currently finding they have the better rates since the end of July, according to the interbank rate. It is impossible to say which direction levels will ultimately head but with Brexit uncertainties appearing to persist, and uncertainty over the ECB’s next moves, there is plenty to discuss.

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