Good morning,

Lunchtime today will see the ECB announce their update to policy for the coming months which will have an influence on the price action for GBP/EUR. As mentioned previously, since topping 1.1830 mid-August, the rate has struggled to capitalise and sits 1.5% lower at the time of writing. Not all of this comes down to pound weakness however, as the euro made some impressive gains against the dollar through the end of August. The consensus in the market is that interest rate policy will remain unchanged, however, the following press conference at 13:30 BST will be where traders will be focusing their attention.

The key highlight from the conference will be a view as to whether the ECB plans to reduce or continue on the current path of PEPP purchases. The Pandemic Emergency Purchase Programme was set up back in March 2020 to aid the market as Covid hit and the uncertainty that ensued. Should the central bank hint to a reduction in that programme the euro is expected to gain.

The pound remains on shaky ground and it is a struggle to see where the next positive turn will come from. Following a summer that saw the ‘pingdemic’ from test and trace, to shortages of HGV drivers and the end of the furlough scheme, the data front may not be the path to gains for sterling.

Have a great day.

Jack Nicholls, Senior Relationship Manager.

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