The GBPEUR exchange rate slipped back to the 1.15 level after the latest interest rate announcement from the European Central Bank. The bank held rates steady at zero as was widely expected, but they did suggest extended stimulus to support the economy.
The GBP v EUR is trading at 1.1520 in early trading on Friday and the 1.15 level would be the barrier to further losses in sterling.
ECB commits to bond buying pace
The outlook for the Eurozone recovery is still “clouded by uncertainty” due to the vaccine rollout and case numbers, according to the ECB.
The central bank kept its key interest rates on hold on Thursday and they also committed to purchasing bonds “at a significantly higher pace” through the second quarter.
ECB President Christine Lagarde said: “We still have a long way to go until we’ve crossed the bridge of the pandemic and the recovery is sustainable and solid”.
She also said that any talk of tapering, or winding down, those purchases was “premature”.
“There has been a clear and significant increase in that pace of purchase and it will continue to be that way. We need to continue those purchases at this significantly higher pace than during the first two moths of 2021,” Ms. Lagarde added.
The ECB’s pandemic purchase program saw an increase of €28bn last week and now operates at similar levels to the height of the crisis. That has soothed investors, but maybe it should be a worry. Stock markets and other risk assets have powered ahead, but the underlying story has been one of vaccine delays and rising cases in the EU.
The ECB will pick up the slack but the Eurozone will likely miss their growth targets and the UK is currently moving to a reopening.
April PMIs will guide on Friday
It’s a busy day for economic data in the GBP v EUR pair and the UK started with a lower-than-expected consumer confidence figure. The Gfk number was expected to come in at -12, but was lower at -15. This was countered by stronger retail sales, which was twice analysts’ forecasts. The retail sales figure was 7.2% compared to 3.5%. Public sector borrowing was a drag with the government borrowing £28bn compared to the expected $22.5bn.
The market will now focus on preliminary PMI figures for Germany, the Eurozone and the UK. Germany’s manufacturing sector will be the country’s focus, while the UK numbers see the services sector as the key driver. Numbers in both the Eurozone and Britain have been higher than the 50 level which marks expansion. The UK services number is forecast to jump from 56.3 to 59 in today’s release. The March retail sales are a good indicator for the UK ahead of the recent reopening of retail establishments.
The GBPEUR has support at 1.15 and the data could see that level give way to put more pressure on the sterling uptrend. Today’s data will determine where the pair goes next.