GBP EUR Rallies After ECB Reduces Pandemic Support
The GBP EUR exchange rate was 0.42% higher on Thursday after the ECB said they would reduce their pandemic stimulus measures. As expected, the move will be gradual and that has seen the pound rebound to the 1.1700 level. Markets will now wait for another German inflation figure today and a GDP update for the UK.
The GBP to EUR found a floor near the 1.1620 level this week and will aim for the 1.18 highs again.
European central bank easing pandemic support
The European Central Bank has said it will reduce some of its huge emergency pandemic support for the economy. The move comes after an increasing recovery in business activity and consumer spending was met with higher inflation.
The bank said on Thursday that it could run the bond purchase stimulus program at “a moderately lower pace” than in recent months. Since March, the strategy has been to purchase bonds at a “significantly higher pace” than in the first three months.
The 1.85 trillion euro bond purchase program will be reduced and analysts have suggested the bank could ease it to 70 billion euro or 60 billion euros, from roughly 80 billion per month since March.
ECB chief Christine Lagarde said at the news conference that “the rebound phase in the eurozone economy is increasingly advanced.” leaving the eurozone on track to reach its post-pandemic growth levels by the end of the year.
But she also warned that there was, “some way to go before the damage from the pandemic is overcome.”
The Governing Council voted to maintain the current interest rate at 0%, on the marginal lending facility at 0.25% and on the deposit facility at -0.5%.
UK set to see sharp growth slowdown: Chamber of Commerce
The UK is heading for a sharp slowdown in economic growth due to the supply chain crisis and staff shortages, which threaten to derail Britain’s recovery, according to the British Chambers of Commerce.
The group warned there is also a “real danger” the Government’s health and social care levy could further hamper the economic recovery from the pandemic lockdowns.
The statements came after the government announced a 1.25% national insurance tax hike to raise £12 billion to help fund the NHS backlog and social care system.
The BCC slashed its forecast for GDP in the third quarter to 2.8% from 3.5% previously and said that supply chain disruption and hiring difficulties are offsetting the reopening bounce in the country.
The BCC also predicted that GDP, which was 4.8% in the second quarter, would ease to 1.6% between October and December.
The UK will see another GDP update today and that is expected to show a further slowdown in growth over July, with most economists expecting a 0.5% expansion, down from 1% in June.
Today will also another German inflation reading with a jump of 0.1% expected to 3.9% and a higher number could put pressure on the ECB to wind the stimulus back more quickly.
The post GBP EUR Rallies After ECB Reduces Pandemic Support appeared first on Pound Sterling Forecast.
Source: https://www.poundsterlingforecast.com/2021/09/gbp-eur-rallies-after-ecb-reduces-pandemic-support/
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