GBPEUR rallies following revised data release ; Market awaits ECB rate decision
GBP/EUR ended last week at its highest point since August 2022, and with two central bank meetings with this, further volatility is widely expected.
The GBP/EUR rate just fell short of the yearly high last week at 1.1715, but it could now find itself stagnating or even falling if the ECBs interest rate decision on Thursday helps the single currency recover, or if UK economic data causes the market to lose interest in Sterling first.
In a booming market for risky assets last week, the pound edged up against a variety of counterparts, but it gained significantly against the euro in the second half after Eurostat revised previously released data suggested that the European economy entered a technical recession in the first quarter.
ECB meeting:
The European Central Bank is expected to lift its interest rates by 25-basis points once more when the officials meet on Thursday. However, doubts remain over how much higher the ECB will go with hikes, given euro area inflation fell faster than expected in May and data last week showed that the EU economy fell into recession in the first three months of the year. Nevertheless, ECB President Christine Lagarde said last Monday it was too early to call a peak in core inflation and reaffirmed rates would need to be increased again.
USD:
The US Dollar traded largely unchanged this morning in the early European session, continuing near multi-week lows as market participants seem reluctant to take new positions at the start of a week that includes a policy-setting meeting by the Federal Reserve. The GBP/USD rate remains buoyant, edging ever nearer to the 1.26 level again.
In fact, the Dollar Index, was flat at 103.15, having dropped nearly 0.5% last week, its worst weekly fall since mid-April. The dollar retreated last week after data showed that the number of Americans filing new claims for unemployment benefits surged to the highest level in more than 1 ½ years, pointing to the Federal Reserve pausing its year-long rate hiking cycle when officials conclude their two-day meeting on Wednesday.
However, traders seem reluctant to push the dollar even weaker at the start of the new week as tomorrows U.S. CPI data could alter sentiment if inflation continues to remain elevated.
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