Euro gains momentum against GBP

Daily Currency Update

The euro gains strength against the pound, pushing GBP/EUR prices lower.

President of the European Central Bank Christine Lagarde stated that policymakers of the European Central Bank had not considered the possibility of pursuing further rate cuts. Christine Lagarde also suggested the central bank’s intention was to maintain high-interest rate levels for an extended period and was ready to increase rates if needed. The pro-active comments from Christine Lagarde pushed the euro higher against the pound last week and the sentiment around the comment continues to put pressure on Sterling.

It's worth bearing in mind that investors anticipate the Bank of England will raise interest rates by 25bps on Thursday's meeting and the comments following will be closely watched for clearer direction of the currency pair. The continuation of interest rate rises from the Bank of England reflects the effort to bring inflation back to the target rate desired and stabilize the economy. Typically interest rate rises are seen as positive for the currency however the Bank of England Governor Andrew Bailey has indicated that they are closer to ending of its current cycle of interest rates. The cooling of the labour market in the UK and concerns of a potential recession could sway the Bank of England to consider the effects and pause further rate hikes which could reflect negatively on the pound.