UK inflation hit Sterling value
With the second round of Brexit negotiations starting in Brussels yesterday, it was UK inflation that hit Sterling’s value. The EUR/GBP rate surged yesterday following lower than expected UK inflation data, before dropping slightly back towards the end of the day.
The Euro has dropped against the Pound throughout today, with the EUR/GBP rate sat at 0.8835 at the time of writing.
Movement for the Euro today was hampered by the fact that investors are awaiting tomorrow’s European Central Bank (ECB) interest rate decision at 12:45pm and the monetary policy statement and press conference following at 1:30pm.
Analysts await Draghi’s tone
Analysts are not expecting the ECB to announce any change in the interest rate, so the press conference could be the more likely event to cause any shift in the EUR/GBP rate. Investors will be more interested in ECB President, Mario Draghi’s sentiment concerning monetary policy, a hawkish tone could benefit those selling Euros.
Following last month’s ECB Conference in Portugal the Euro benefitted from Mr Draghi’s more hawkish tone, although these gains were quickly reversed when it appeared that his comments were misunderstood by the markets.
If Mr Draghi indicates that the ECB are looking to loosen monetary policy and wind down their Quantitative Easing policy we could see a sharp move upwards in the Euro’s value.
At 3:00pm tomorrow there is another data release in the form of Consumer Confidence for July, with the data expected to slow a slight downturn to 1.1 from 1.3. This is by no means expected to be the main event for the day, with the ECB press conference likely to steal the limelight.
UK Retail Sales data tomorrow
With potential for the Euro to put pressure on Sterling, month-on-month and year-on-year Retail Sales data for the UK could offer some good news the Pound, with both expected to be positive.