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Volatile pound gains vs euro after ECB announcement

Lucy Raitano
Updated ·2-min read
FILE PHOTO: A shop cash register is seen with both Sterling and Euro currency in the till at the border town of Pettigo

By Lucy Raitano

LONDON (Reuters) - The British pound had a volatile trading session on Thursday, ticking up marginally against the dollar and rising against the euro as markets digested news the ECB is getting ready for a series of rate hikes.

However, Britain's gloomy economic outlook and political worries continued to dominate traders' priority lists.

By 1440 GMT the pound was up a marginal 0.03% against the dollar at $1.25390, rising from earlier trading when it was down as much as 0.32%.

Tracking a volatile euro, sterling swung wildly against the single currency in early afternoon. By 1447 GMT it was 0.48% higher at 85.220 pence, but earlier in the afternoon had been trading as much as 0.47% down.

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"The main event for the FX market today was the ECB meeting that has pushed EUR lower across the board and weighed on EUR/GBP as a result," said Valentin Marinov, head of G10 FX research at Credit Agricole.

The European Central Bank ended a long-running stimulus scheme on Thursday and signalled it would deliver its first interest rate hike since 2011 next month, followed by a potentially larger move in September if inflation does not cool down.

Helping buoy the pound against the dollar was British Prime Minister Boris Johnson's announcement of a package of new measures to help a worsening cost-of-living crunch for households. It was his first policy speech since Monday's vote of confidence when 41% of his own lawmakers voted against him.

But uncertainty over the longevity of his position and what that means for future fiscal policy and post-Brexit arrangements covering trade with Northern Ireland are weighing on sterling.

"Indeed, PM Johnson did not mention the controversial legislation during his speech today and this could mean that the government is becoming increasingly conscious of the fact that hard Brexit has contributed to the stagflationary headwinds that are buffeting the UK economy at present," said Marinov.

(Reporting by Lucy Raitano; Editing by Alex Richardson)