This afternoon the European Central Bank (ECB), as expected, revealed they will not be changing the interest rate across the Eurozone, keeping the current level at 0%. There wasn’t expected to be any changes to the rate, however President of the ECB, Mario Draghi in a statement after the release did not disappoint the markets.

There was an initial drop in the GBP/EUR exchange rate down below 1.09, followed by a bounce back to 1.096. The market has now settled after the drama, but Sterling has lost ground overall with the rate settling in the 1.08’s. Mr Draghi did follow the path many economists assumed he would take, raising concern about Euro strength but suggesting the economic stimulus will eventually start to be tapered. This has been the general consensus for a while now, while Euro strength is a concern to the Eurozone, the tapering of the Quantitative Easing program seems highly likely to start in the near future.

Where to next for the GBP/EUR exchange rate

In his speech following the ECB’s interest rate decision, Mario Draghi was keen to point out that Eurozone data moving forwards could well be weaker due to the Euro’s recent strength. Trade is likely to be down as the cost of exports keep climbing up and up, which in turn will take its toll. This will also lead to a decrease in inflation levels, which will almost put to bed a future interest rate hike for some considerable time.

Now that Sterling has got through this challenge today I believe we’re not too far from a movement back above 1.10. The Euro has been strong but it’s clear that is not an indefinite fact and there might not be much more favourable movement going forwards. If there is slow data coming down the line I would not be surprised by some Euro weakness. Furthermore, if there was positive process with the Brexit negotiations Sterling could very quickly start to make back some of the lost ground in the last 6 months, parity looks as though it’s a long way off for the near future.