In the ECB’s accompanying statement the bank reiterated that interest rates would remain flat until the bloc’s inflation outlook is seen to “robustly converge” to just below 2 percent. The euro remained unmoved against the pound, however, as the bank maintains its “wait and see” approach to policy.
The newly appointed ECB President Christine Lagarde struck a positive note, saying that she took “some comfort” from improved relations between US President Donald Trump and the European Commission Chief, Ursula Von der Leyen.
Mme Lagarde also commended the “tone and determination” around a possible US-EU trade deal.
The ECB President also highlighted the various risks to the Eurozone’s economic growth outlook, saying that “geopolitical factors, rising protectionism and vulnerabilities in emerging markets remain tilted to the downside”, but that uncertainty around international trade was now decreasing.
The euro held steady against the pound as hopes for Germany’s economic recovery improve, with the recently signed US-China “phase one” trade agreement offering a lifeline to the Eurozone’s largest and global trade-reliant economy.
Meanwhile, the pound has remained subdued today after Stefaan De Rynck, a top advisor to the European Union’s Chief Brexit Advisor Michel Barnier, said that there was a much-needed “dose of realism” required in UK-EU Brexit trade deal negotiations.
This follows comments made by Chancellor Sajid Javid, who increased fears of a hard Brexit by saying that the UK would diverge from EU regulations post-January 31, when the UK is officially expected to leave the EU.
Looking ahead to tomorrow, we could see the pound edge higher against the euro if the UK Markit services PMI confirms consensus and rises from 50 to 51, as this would lower the odds of an interest rate cut from the Bank of England next week.