Euro to Pound: Could ECB Meeting Today Lead to EUR Gains?

Euro to Pound: Could ECB Meeting Today Lead to EUR Gains?

The Euro to Pound exchange rate has been gradually climbing since Monday, with the pair trading at its best level of the week at the time of writing. Monday was bad day for the pair as the Pound had its best day against the Euro in around 2-months after the pair climbed by 0.85%. The gains on Monday were perhaps down to the lifting of lockdown restrictions in England as well as economic data releases in the UK’s manufacturing sector showing better than expected results through May.

Since Monday though, the momentum is once again with the Euro and it has gradually clawed back the losses from Monday’s trading session, and the pair are currently trading just over 0.8950.

During today’s trading session much of the focus will be on the European Central Bank’s economic policy announcement which will be released at 12.45pm, followed by a Press Conference with ECB president Lagarde which begins at 1.30pm. The focus will be on whether or not the ECB has plans for further financial stimulus, and there have been calls for this since President Lagarde announced that the Eurozone GDP is expected to fall between 8-12% this year. Back in March the central bank announced that it would buy €750bn worth of bonds this year, to try and aid the economic bloc due to the lockdown measures imposed on countries to try and quell the damage of the Covid-19 virus. As the lockdown measures lasted longer than expected for some, the calls for further impetus have increased which is why I think the conference this afternoon could be followed very closely.

The Euro was boosted once again yesterday after Germany, the powerhouse of the trading bloc, announced a greater than expected domestic stimulus package of €130bn which includes a reduction to VAT for the remainder of the year. It was perhaps this announcement along with comments from a key figure within the UK that the UK must prepare for a no-deal Brexit that maybe pushed the Pound lower yesterday afternoon, and this trend has also continued this morning.

Will June Determine the Pound’s Direction Throughout 2020?

This month is key for the UK moving forward, especially from a political standpoint. Negotiators from both the UK and EU have outlined June as the month whereby progress on trade talks must be made, and it is also the final month in which the UK can formally request an extension to the Brexit departure date. At the moment the expected date of departure from the EU is on the 31st of January 2021 so if no extension is requested this month, we can expect that date next year to be written into law. With the Covid-19 pandemic its been difficult for the parties to discuss trade deals but despite this, the comments from both sides suggest that there will be no extension.

This will be a concern for some and just yesterday Nissan, the Japanese carmaker with factories in the UK was in the news after a company spokesperson said that business as usual would be very difficult without a deal in place. Similar fears of a cliff edge Brexit could also be behind the increasing amounts of short/sell positions being placed against the Pound. Shorting or Selling a currency is when currency speculators bet on a currency falling in future and these kinds of positions against the Pound have increased for 12 consecutive weeks according to reports from Bloomberg. It demonstrates that the underlying sentiment towards the Pound is negative so I think those of our readers following the Pound’s value should be aware of this.

Yesterday Bank of England governor Andy Baily said that UK banks must step up preparations regarding the possibility of a no-deal Brexit. This is perhaps why the Pound fell during yesterday’s trading session and something we could here more about later this month, and certainly this year.

Economic data due out of the UK and EU is light this week but tomorrow could still be busy for EURGBP exchange rate as US jobs data will be under the microscope tomorrow afternoon when non-farm payroll and unemployment data is released. The EURUSD pairing is the most trading globally so if there is a surge in buying or selling of USD it can have a knock-on effect on the EUR so this is worth being aware of also.

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