Euro Sterling Rate Today: The GBP Rally Looks to be Over for Now, ECB event risk ahead

A look at the forex markets at mid-morning in London on Thursday the 7th shows the British pound to be slipping back against the euro.

The EUR/GBP exchange rate is quoted at0.8407, GBP/EUR is thus at 1.1895.

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Is this the end of the sterling rally?

The British pound is starting to see the onset of profit-taking as the decisive rally witnessed through the earlier part of the week is halted.

As Graham Harborne at Currency Index notes, this could be the end of the recent rally:

"So far we have a bit of a mixed week in the currency markets and there might well be some concern for those Sterling bulls amongst you.

"A raft of positive UK data releases have seen the pound pick up against both the euro and dollar this week but possibly more significantly it has failed to push higher and indeed retraced each time it has strengthened.

"A possible reason for this is that the BoE seem to have made their position on a future rate rise fairly clear – if we don’t see a dramatic fall in the unemployment rate interest rates will remain low.

"I suspect that unless we continue to see positive data releases the pound could slowly slip away. Having said that Mark Carney and his MPC colleagues could spring a surprise on us but don’t expect to see that anytime soon!"

Today's outlook for the euro sterling exchange rate

Today is all about the decisions at the European and English central banks. It is not worth dwelling on the Bank of England decision however as there is an almost nil chance of any changes being made.

Do however watch out for the release of an accompanying statement. With the next quarterly inflation report due next week this is also highly unlikely.

So, action for the EUR GBP pairing will likely come from the ECB.

"The ECB meeting today promises to be eventful for markets. The ECB is under increasing pressure to fight low inflation, but has not much conventional ammunition left. Will it try to buy time as most observers
expect or will it surprise and take bold action? If not, will Draghi sound soft enough to avoid sell-off?" asks Piet Lammens at KBC Markets.

Emmanuel Ng at OCBC chimes in: "Expect scrutiny on the ECB, where although no change in policy is expected, investors will be on the lookout for hints of further dovishness. On our end, even if the prospect of further interest rate cuts are not addressed today by Draghi, any rhetoric with respect to the potential for further liquidity operations (or the level of the EUR) would still be equally damaging for the EUR’s near term prospects."  

The ECB statement is due at 12:45 GMT, the press conference is due at 13:30.