GBP EUR Higher on ECB Interest Rate Comments

GBP EUR Higher on ECB Interest Rate Comments

The GBP EUR exchange rate was higher by 0.38% after comments from the European Central Bank (ECB) hinted at a September rate hike. That was more dovish than some traders had expected. The pound sterling was supported despite the release of the Sue Gray report which will increase pressure on Boris Johnson’s team.

The GBP to EUR was trading at 1.1715 as it looks to fend off recent weakness.

European Central Bank’s Knot Agrees with Lagarde

Dutch central bank chief Klaas Knot has said that he fully supported ECB President Christine Lagarde’s schedule for interest rate hikes.

“Our president has issued a blog on how policy would respond to inflation,” Knot said. “I’m fully on board, I fully support everything that is in the blog, I think it nicely charts the policy course.”

Lagarde had remarked earlier this week that the deposit rate should start rising in July and could be at zero or “slightly above” by the end of September.

“I expect net purchases under the APP to end very early in the third quarter,” she said in a blog post. “This would allow us a rate lift-off at our meeting in July, in line with our forward guidance. Based on the current outlook, we are likely to be in a position to exit negative interest rates by the end of the third quarter.”

The comments finally gave markets some long-awaited clarity on European interest rates, but some had hoped for a July interest rate hike and the pound sterling is appreciating on that.

German GDP and consumer confidence came in as expected with Europe’s largest economy still facing pressures. Attention will now turn to Monday’s inflation figure with the data concluded for the pound versus the euro pair this week.

Sue Gray report could put further pressure on Johnson government

Sue Gray’s long-awaited report into the UK government’s Partygate scandal talked of a “a serious failure” to abide by the “standards expected of the entire British population” during the pandemic.

In the report, which will heap further pressure on the Johnson government, it was said that “too little thought” was given over “the risks they presented to public health and how they might appear to the public”.

“There were failures of leadership and judgment by different parts of No 10 and the Cabinet Office at different times,” Ms Gray said.

 

“Some of the events should not have been allowed to take place. Other events should not have been allowed to develop as they did. The senior leadership at the centre, both political and official, must bear responsibility for this culture,” she concluded.

Boris Johnson was already on damage control over the report, claiming to be “humbled” by the report.

However, the damage had already been done on the local election level with big losses in previous strongholds and with the report now concluded, it may not be long until a change at Number 10 is a reality for the pound sterling.

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