GBP EUR Pares Losses after ECB Rate Hike Move 

GBP EUR Pares Losses after ECB Rate Hike Move 

The GBP EUR exchange rate was 0.11% higher after paring earlier losses at the ECB policy meeting. Traders pushed the euro higher on a 50-basis point rate hike but reacted badly to the new bailout tool after pushback from Spain. In the UK, Rishi Sunak battles with Liz Truss for the Conservative leadership. 

The GBP to EUR trades at 1.1740 after an earlier test of the 1.650 level after the initial ECB comments. 

European central bank hikes rates for first time in 11 years

The European Central Bank hiked interest rates at the top of expectations on Thursday as the bank joined other Western policymakers to reduce inflation in the Eurozone. 

The ECB increased its benchmark rate by 50 basis points to zero per cent, breaking previous guidance for a 25 bps rise in the first-rate hike in over a decade. The ECB also clarified its new bailout tool for indebted euro nations. Reuters said the bank would not use the tool immediately, despite Italian bonds being sold on political pressures. 

The European Central Bank rate move brings an end to eight years of stimulus and negative interest rates, with the potential for further action over the next two months. ECB President Lagarde said that they expect inflation to stay undesirably high for a period with price pressure moving across further sectors.  

“We decided on balance that it was appropriate to take a larger step towards exiting from negative interest rates,” she added. 

The ECB fell behind the curve with rate hikes, but markets recently got the memo from central banks and scaled back risky market bets. 

Sunak slams ‘fairy tale’ policies of Liz Truss with no rate cut plans

Rishi Sunak squares up against Foreign Secretary Liz Truss in the battle for the Conservative leadership and Prime Minister position. 

Mr Sunak leads with 137 votes while Liz Truss secured the final place with 113 votes. Sunak was the only candidate not to promise tax cuts, which he called a fairy tale. 

The former Chancellor also vowed to cut taxes later but said once they get a grip on inflation, he will bring the tax burden now, adding it’s a question of “when” not “if”.  

He also took a shot at Ms Truss, saying: “We need a return to traditional Conservative economic values – and that means honesty and responsibility, not fairy tales.” 

“I have had to make some of the most difficult choices in my life when I was Chancellor, particularly how to deal with our debt and borrowing after Covid.” 

Meanwhile, fuel protests block the UK’s motorways on Friday as drivers feel the pinch of record fuel prices. Avon and Somerset Police said “slow-moving roadblocks” will affect several of England’s main road routes. 

One group, named Fuel Price Stand Against Tax, has hinted that demonstrations will be held “nationwide”, including Birmingham, Cardiff, Liverpool, London and Manchester. 

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