GBPEUR Sees Sterling Lose Momentum Before ECB

GBP EUR Exchange Rate: The Week Ahead October 10th

The GBPEUR exchange rate is -0.22% lower on Thursday ahead of the latest European Central Bank rate decision and press conference. The market expects the central bank to hold off on any interest rate move and they also expect a dull press conference with cautious remarks and no changes to stimulus measures.

GBPEUR trades below 1.1550 as the pair loses control of the 1.1600 resistance level and a 1.1500 level will be at risk from the meeting.

Lagarde will see pressure on support duration

European Central Bank President Christine Lagarde is likely to be asked to give more details on the length of time that the Eurozone will need monetary support. It’s likely that the bank will commit to their current level of bond buying into May and June, but the economy is still pressured by the virus in the largest nations.

The ECB is facing high virus rates and tough restrictions on economies, while vaccine delays have seen the euro area lagging the UK and other nations in reopening. A recent increase in vaccinations and talk of joint fiscal support from nations has led to a rebound in the euro, but the economy could still undershoot recent projections from the likes of the IMF.

trailing well behind the U.S. At the same time, progress on vaccinations and joint fiscal aid is fuelling optimism that a vigorous rebound is close.

In recent comments, Ms. Lagarde said that the European economy was still standing on “two crutches”. “You don’t want to remove either crutch, the fiscal or the monetary, until the patient can actually walk fine and to do that means support well into the recovery,” She added.

So, the European economy could lag with its opening and the ECB are happy to wait for long into the recovery to remove its support. That probably implies that we won’t see much change until near the end of the year.

Inflation has cooled lately, which was a boost to policymakers after the threat of bond yields rising with inflation expectations. The slower reopening could also help in this regard as the US Federal Reserve and the Bank of England will likely have to answer questions in the next month or two if inflation picks up further with the economy bouncing back.

German MPs approve the circuit-breaker law

German lawmakers approved a proposal by Chancellor Angela Merkel’s government to create a federal nationwide lockdown in areas where the virus is spreading. This follows the Chancellor’s failed attempt for an Easter lockdown and will impose evening curfews and other measures.

Lawmakers voted 342-250 in a close-run affair with 64 abstentions, as protestors gathered in their thousands and police made arrests. Citizens will be worried that another lockdown is imminent after the Easter u-turn.

The GBPEUR is looking to move to the 1.15 figure and that was where the recent bounce occurred so a swift move could happen to 1.14 if that level is broken. The 1.13 level was stubborn for the pair and would be the key support for pound gains.