GBPEUR Unmoved by Latest ECB Rates Comments

GBPEUR Makes an Early Rally on Monday

The GBPEUR failed to see any real move despite the latest interest rate announcement from the European Central Bank. Traders were expecting the bank to hold steady on rates and this was the case. ECB chief Christine Lagarde made some comments regarding the latest move in inflation but this was possibly priced in to the pair.

The GBPEUR is trading at 1.1675 and today also saw German inflation and UK GDP updates.

UK GDP Falls in January as Lockdowns Bite

The latest update on UK GDP growth saw the economy falling -9.2% in January as the lockdown continued to eat into the services sector.

The figures were actually better than the -10.9% expected but this was also maybe priced in after a recent upgrade from the OECD. The three-month average for UK growth was -1.7% but this covered three months of virus-hampered business.

January’s growth figure 9% below the level of February last year, before the pandemic started. The ONS said the services sector had been the laggard in the latest update, with the sector decreasing by 3.5 per cent.

Despite the latest update, traders are looking ahead to a reopening of the economy and the OECD flagged the vaccine rollout as the springboard for gains. The group added 0.9% to its 2021 prediction for UK growth with a reading of 5.1%.

British schools went back this week with the country looking forward to a further easing of lockdown restrictions in the coming weeks.

Lagarde Talks of ‘Undesirable’ Bond Moves

Investors were watching yesterday’s ECB press conference for an update on the recent selling in the debt market.

The current European Central Bank President also said the bank would act if the situation reappeared:

“We will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions”.

Lagarde also talked of a “firm rebound in economic activity in the course of 2021,” if the virus did not reappear and also said the central bank would purchase bonds at a “significantly higher pace” in the coming months, which will be aimed at further supporting the rebound. Despite those comments, the pound v euro remains anchored below the 1.17 level. The price marks the highs after the announcement of the UK’s reopening strategy and the 2020 highs of 1.20 are above that level.

Next week will bring the Bank of England’s interest rate announcement to the fore and there may be some price activity around the meeting.

German inflation figures came in as expected this morning at 1.3% as Europe continues to bounce out of their 2020 deflationary bind. Get in touch to discuss this data release and be kept up to date with the latest market movements, and how your currency exchange is likely to be impacted.