Sterling buoyant ahead of ECB meeting

By Simon Eastman

Yesterday we saw sterling continue to hold strong, keeping at the top of the recent range against the euro and pushing up against the US dollar.

There was a lack of data released yesterday so traders didn’t have much more than sentiment to go on, with all eyes waiting for the European Central Bank meeting tomorrow where they’ll decide on their interest rates and whether to cut or not. This has been under speculation recently, having previously mentioned they may consider cutting their base rate, but little insight as to when. Cutting rates, especially before the Bank of England should lead to euro weakness, and is the main reason the pound has been holding ground this week.

If the ECB do cut rates we could see rates on GBP/EUR push up above the current range but it’s a big if. There hasn’t been much confirmation from any ECB member that a cut could come so early in the year, so while speculation occurs before the event, these levels could be short lived should the Bank hold rates and indicate further guidance is needed from future data releases. With that in mind, those with sterling in hand looking to buy in the eurozone might be prudent to look at securing funds ahead of the meeting at lunch tomorrow in case we see a cautious stance from the Bank and the euro pares back some of its losses.

For those buying stateside, the dollar is also weaker at present so good opportunities to buy lie here also. The US release CPI inflation figures this afternoon though so again, buying ahead of the lunchtime release might be worthwhile in case inflation causes the dollar the strengthen. We also see the release of the Feds minutes from their latest interest rate meeting this evening, so expect movement on rates off the back of that as US markets continue trading after we close.

Up over the border, we have the Canadian interest rate decision mid afternoon where we expect no change but again, caution should be taken to any comments made at the subsequent press conference at 3.30pm to give insight into the economy and the Banks future rate guidance.

For all your updates and friendly guidance get in touch with one of the team today to discuss the options available to secure your currency.