With the ECB decision yesterday, and weak UK data today, the outlook for the pound is now a bit in doubt.
As we mentioned earlier on in the week the European Central Bank meeting was going to be key if the GBP/EUR exchange rate were to rise this week. Yesterday the ECB once again maintained its pledge to move slowly in removing euro area stimulus, with Mario Draghi (President of the ECB) once again dismissing any concerns of a slowdown within Europe as well as giving no indications about the future of quantitative easing within Europe. The market was expecting more guidance and clarity from the ECB about the future of their policy decisions and it was this uncertainty which caused the Euro to weaken following the meeting.
However, this move higher in GBP/EUR was quickly reversed this morning as the UK’s economic growth fell to a five-year low of 0.1%, as snow hit retail sales and disrupted building work, causing the pound to fall against the Euro and US Dollar. The Bank of England could now be reluctant to raise interest rates next month with the UK economy looking so fragile. The outlook for the pound is now looking a little bit frosty…
GBP/EUR 1.135 EUR/GBP 0.865
GBP/USD 1.35 USD/GBP 1.395
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