Currency Note

Focus on European Central Bank meeting today

By Alex Bennett June 9th, 2022

All eyes will be on the European Central Bank’s monetary policy meeting, which is due to take place later today.

Officials are set to end the ECB’s bond buying programme and pave the way for interest rate hikes at subsequent meetings, including the next meeting in July. This is to tackle high inflation, which came in at 8.1% year-on-year in May. The markets are expecting ‘hawkish’ rhetoric from officials later today and the euro could be impacted.

The British Chambers of Commerce’s latest economic forecast predicts that the UK economy will not grow in quarter two and three of this year and could contract in quarter four. It cites a drop in business investment and high inflation as points of concern.

In the US, the markets await the latest inflation data, which will be released tomorrow.

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GBP: Pound slightly weaker after surprise surge

After a surprise surge on Tuesday afternoon, the pound has weakened slightly against the euro and the dollar. Sterling could be impacted by the European Central Bank’s monetary policy meeting today, as the markets will also be looking ahead to the Bank of England’s meeting next week.

A 25-basis point interest rate hike is expected at the Bank of England’s meeting next week in order to tame high inflation.

The latest forecast from the British Chambers of Commerce shows that the UK economy is expected to show no growth in quarter two and three of this year and could contract in quarter four.

GBP/USD past year

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EUR: ECB meeting at lunchtime today

The euro strengthened yesterday against several currencies ahead of the European Central Bank’s meeting later today.

At the meeting, officials are expected to pave the way for a July interest rate hike, as well as further hikes throughout the course of the year. Markets are expecting a wholly ‘hawkish’ message from the meeting, so if these expectations aren’t met, the euro could suffer.

The European Central Bank’s interest rate decision is due to take place at 12:45pm and the markets will be listening closely.

USD: Dollar looks to inflation figures

The dollar is slightly weaker against a basket of currencies this morning ahead of the release of US inflation data tomorrow.

Inflation is predicted to have stayed the same year-on-year in May and core inflation is predicted to have decreased slightly.

Today, jobless claims figures will be released, which will give an indication of how the labour market has performed over the past week.

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