EUR/GBP seasonal strength heading into the ECB meeting [Video]
|Heading into the ECB rate meeting on Thursday this week, a Reuters poll from last week shows 39 out of 69 economists surveyed are expecting the European Central Bank to keep rates unchanged at 3.75%. However, 30 of the economists expect the ECB to increase rates by 25 basis points.
Recent commentary from ECB’s central bankers has also been mixed. ECB’s Knot said last week that markets may underestimate a September hike, and ECB’s Kazmir says one more, likely last, interest rate hike is still needed. In contrast, ECB is VSCO believes the ECB is close to the level of rates at which you can stop increasing rates.
So, the expectations are fairly evenly balanced with short-term interest rate markets favoring the chances of the ECB being on hold. However, the seasonal bias for the EURGBP is titled to the upside. Over the last 15 years, between September 15 and October 9, the EURGBP has gained 60% of the time with an average return of 1.10%. So, if we see a more hawkish decision, with the ECB hiking rates, will we see the EURGBP gain into the start of early October?
Major Trade Risks: The major trade risk here is that the UK side of the trade could be volatile depending on the Bank of England’s rate path. Furthermore, the ECB may indicate a more dovish outlook by holding rates and signaling the end of the ECB’s hiking cycle.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.