Pound to Euro Exchange Rate Forecast: GBP/EUR Jumps as ECB's Draghi Speaks

27 April, 2018, 00:42 | Author: Salvatore Jensen
  • European Central Bank leaves interest rate unchanged, despite slowing of EU economic growth

"Following several quarters of higher than expected growth, incoming information since our meeting in early March points towards some moderation while remaining consistent with a solid and broad based expansion of the euro area economy", Mr Draghi told reporters in Frankfurt.

"The main takeaway is that nothing has changed in the ECB's policy stance and they remain on course to taper later in the year", said Marchel Alexandrovich, European financial economist at Jefferies.

Early hints a slowdown could be coming for the single currency's 19-member nations after a year of unexpectedly muscular growth also stayed policymakers' hands.

The real risks to the 19-member eurozone's outlook were global, Draghi said, with the European Central Bank president singling out trade tensions stemming from Trump's "America First" protectionist drive.

The ECB kept rates at record lows and confirmed that quantitative easing bond purchases would continue at 30 billion euros ($36.5 billion) a month until at least end-September or until it saw a sustained adjustment in the path of inflation.

The bank also confirmed that the net asset purchases, at the current monthly pace of Euro 30 billion, will run until the end of September 2018, or beyond, if necessary, and in any case until the Governing Council sees a sustained adjustment in the path of inflation consistent with its inflation aim.

At the time of writing, EUR/USD had fallen to 1.2124 from a pre-meeting level of 1.2175 and the Pound-to-Euro exchange rate had risen to 1.1510 from 1.1480 prior to the meeting.




They said a decision on future moves would likely be communicated in June or July, with September only an outside possibility as it was too close to the tentative end date of asset buys.

Business sentiment has already taken a hit, particularly in export-focused Germany, and a full-fledged trade war could quickly hurt growth - a risk already highlighted by policymakers at the ECB's March meeting. Weather, strikes, the timing of Easter and more factors are behind this moderation.

World markets remained edgy on Thursday, with shares eking out gains amid concern over the global economic outlook and with United States bond yields at four-year highs after breaking above the psychologically significant 3% line this week.

A key worry is that protectionist rhetoric from the United States could push down the value of the dollar even as the Federal Reserve is likely to raise interest rates several times this year, to support the U.S. currency. However, frequent suggestions of underlying weak inflation have called that timeline into question.

Nonetheless, the euro's recent strength has had a relatively limited impact in recent weeks.

This confident message sent the EUR/USD to the highs of the day below $1.2200, but markets remain cautious.

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