GBPEUR Awaits ECB, UK Prepares City Finance Review

GBPEUR Awaits ECB, UK Prepares City Finance Review

The GBPEUR rate is slightly lower at lunchtime on Thursday with the ECB interest rate announcement and press conference coming this afternoon. Yesterday’s action in the markets released pressure on the ECB to clarify their position on bond purchases further.

The UK is also set to conduct a sweeping review of financial markets to try and defend the City of London’s status as a financial sector.

UK to Review Financial Markets Position

The UK government is planning a ranging review of financial markets in an effort to defend the City of London’s status as a financial centre.

Bloomberg conducted an interview with Economic Secretary to the Treasury John Glen and he confirmed that the UK will go further to change rules on initial public offerings and fintech companies. Businesses will also be consulted about needed reforms. The news comes after the City of London saw Amsterdam topping the UK in share trading over the last couple of months.

Glen said that the changes would aim to reduce the burden on market players, but “without undermining the high standards and the integrity of our market and our market reputation.”

The industry makes up 7% of the UK economy and around 10% of its tax receipts and CEOs have urged a need for “nimble evolution,” Mr Glen noted.

Will the ECB Shuffle Bond Purchases?

The big question for the GBPEUR today will be whether the ECB takes any action over the recent rise in bond yields.

That risk has lowered with lower-than-expected US inflation yesterday. The data led to a surge in US stocks, which also saw the $1.9 trillion stimulus package voted in by Democrats. Zero Republicans voted for the bill, while a Deutsche Bank survey showed that younger age groups are expected to put half their stimulus checks in stocks.

The European Central Bank are unlikely to take any action on interest rates and analysts have predicted they may move on an extension to the PEPP bond buying scheme. The ECB could simply note that they will take action in the future and that could boost the euro’s price versus the pound.

Economists expect that the ECB will extend the €1.85 trillion bond program beyond the scheduled end date of March 2022, although that may not come today. The US data and the stimulus approval could mean that a bounce in the euro is the more likely scenario, but that will depend on how aggressive voting members are in the comments that were likely written before the US data.

GBPEUR is trading near the recent highs at a price of 1.1670 and the ECB press conference will be the driver of the next path for the pound and euro. Get in touch using the form below to be kept up to date with the latest market movements.