Will the ECB rate hike help the Pound improve against the Euro?

European Central Bank Interest Rate Decision

The European Central Bank hiked interest rates for the tenth time in a row yesterday afternoon.

Rising inflation has been a problem that central banks have had to deal with since the pandemic.

The Bank of England have also increased interest rates fourteen times in a row. The expectation is now for ‘another one and done’.

The expectation is that we’ll see potentially one more from the Bank of England before they pause to see the impact upon inflation.

The ECB are in arguably a more difficult situation than the Bank of England.

Although inflation remains high, growth has also started to slow as well as manufacturing.

Therefore, further interest rate hikes on the continent could have a negative impact on growth.

Effectively, this means that the ECB may not be able to hike interest rates as aggressively as they may desire.

We saw a small impact on GBPEUR exchange rates with Sterling improving marginally during yesterday afternoon’s trading period.

Eurozone interest rates are now sitting at an all time high.

Interest rates are currently sitting at 4% with forecasted inflation this year expected to be an average of 5.6%.

As with the Federal Reserve and the Bank of England the ECB expects inflation to start to fall in the next two years.

The impact of oil prices on Sterling and the Euro

However, we have the unnerving issues of rising oil prices which have risen dramatically once again in the last few weeks.

If oil prices continue to spiral then this will clearly have a knock on effect on inflation causing issues once again for central banks.

In terms of the impact on Sterling Euro exchange rates whoever announces they are changing monetary policy first could see their particular currency weaken.

Therefore, if you have a currency transfer coming up in the near future keep a close watch out for any hints from either the ECB or Bank of England and their upcoming plans.

If you would like a free quote when buying or selling Euros compared to using your bank then please email me with an outline of your plans and I look forward to hearing from you.

I have worked for one of the UK’s largest currency brokers for 20 years and I’m confident I can make the process simple and straightforward.

Tom Holian [email protected]

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