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Euro supported by hawkish ECB rhetoric as British Pound struggles after weak GDP

  • EUR/GBP holds firm as weak UK GDP data weigh on the British Pound.
  • ECB's Kazimir says the "rate-hike mission is not yet complete" after a 25 bps rate increase on Thursday.
  • The Bank of England is widely expected to leave interest rates unchanged at next week's meeting.

EUR/GBP holds firm on Friday, with the Euro (EUR) modestly outperforming the British Pound (GBP) as weak UK Gross Domestic Product (GDP) data reinforced signs of a slowing economy. At the time of writing, the cross trades around 0.8633, up from an intraday low of 0.8625.

Data released by the UK's Office for National Statistics showed the economy contracted by 0.1% MoM in April, matching market expectations but reversing the 0.3% expansion recorded in March.

The slowdown in economic activity complicates the outlook for the Bank of England (BoE), which is already grappling with elevated inflationary pressures that call for a restrictive policy stance.

The BoE's quarterly survey showed the public's median forecast for inflation over the next year increased to 4.0% from 3.2% in February.

Markets are fully pricing in a hold at next week's monetary policy meeting. According to a Reuters poll conducted between June 5 and 12, economists expect the Bank Rate to stay unchanged through the end of the year. Still, nearly 40% of respondents forecast at least one rate hike, while only six expected a 25-basis-point (bps) cut by year-end.

Meanwhile, the European Central Bank (ECB) raised interest rates by 25 basis points on Thursday and revised its inflation forecasts upward while trimming its growth outlook.

ECB policymaker Peter Kazimir said on Friday that "the rate-hike mission is not yet complete" and warned that "second-round effects are lurking and will materialize." He also said the June inflation data "might be decisive" for the July policy decision.

Nomura's Global FX Strategy team said a "more hawkish ECB path versus the Bank of England" should support the Euro against the Pound. They maintain a long EUR/GBP position and see "narrowing front-end rate differentials" and UK political-fiscal risks as catalysts for a move toward 0.90 in the coming months.

Euro Price Today

The table below shows the percentage change of Euro (EUR) against listed major currencies today. Euro was the strongest against the Swiss Franc.

USDEURGBPJPYCADAUDNZDCHF
USD0.05%0.12%0.18%0.06%0.13%0.24%0.26%
EUR-0.05%0.06%0.13%0.02%0.09%0.19%0.21%
GBP-0.12%-0.06%0.09%-0.05%0.00%0.13%0.16%
JPY-0.18%-0.13%-0.09%-0.14%-0.07%0.05%0.06%
CAD-0.06%-0.02%0.05%0.14%0.07%0.17%0.20%
AUD-0.13%-0.09%-0.00%0.07%-0.07%0.09%0.12%
NZD-0.24%-0.19%-0.13%-0.05%-0.17%-0.09%0.03%
CHF-0.26%-0.21%-0.16%-0.06%-0.20%-0.12%-0.03%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent EUR (base)/USD (quote).

Author

Vishal Chaturvedi

I am a macro-focused research analyst with over four years of experience covering forex and commodities market. I enjoy breaking down complex economic trends and turning them into clear, actionable insights that help traders stay ahead of the curve.

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