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The EURGBP was lower yesterday after comments from the Bank of England (BoE) cooled expectations for negative interest rates. BoE Deputy Governor Dave Ramsden said he expected the floor for the bank’s key interest rate to be 0.1%.
Ramsden’s comments were less hawkish than the MPC meeting minutes last week, which said that the bank had already discussed the policy with a view to implementing them by year-end. The statement had noted a No-Deal Brexit as the driver of such policy so the market maybe got ahead of itself with expectations for negative rates.
Today will be an important one for the Euro as Germany releases inflation figures. Markets are looking for a deflationary tone in a -0.1% number, compared to 0% last month. The European Central Bank has been talking about the strength of the Euro recently, and its deflationary effects, so markets are on guard for a potential intervention by the ECB.
ECB President Christine Lagarde spoke on Monday and played down talk that members of ECB council were split on policy decisions. Lagarde said dissent was “normal and healthy” as fears of a rift over the extent of the bank’s actions grow. If inflation continues to underperform then some form of increased policy action is likely. There is also still a risk of a No Deal Brexit looming with the key deadline in mid-October approaching.
EURGBP has continued to recover after giving up the 0.9175 level. The pound has strengthened to test the support at 0.1900 and the 50-day moving average just ahead of 0.9000. The 0.9175 and 0.9000 levels will be key for larger move and a close beyond either of these levels should see a trend extension. The Investing Cube team is currently available to assist all levels of traders with a Forex Trading Course or one-to-one coaching.
