Sterling Holds Strong Against Euro as Markets Await ECB Rate Decision
Market Overview and Key Drivers
Current Sterling and Euro Performance
LONDON, June 11 (Reuters) - The pound held firm against the euro on Thursday ahead of a European Central Bank meeting that should be the day's main driver for the currency pair with little in terms of scheduled news due from Britain.
The euro was last at 86.3 pence, steady on the day, but near the bottom of its trading range for the year so far.
Factors Supporting the Pound
Risk Sentiment and Bank of England Policy
The pound has been supported against its nearest neighbour in recent months by broad risk sentiment as well as traders shifting their expectations for Bank of England policy moves from rate cuts this year to hikes due to the conflict in the Middle East.
ECB Rate Decision in Focus
Market Expectations
ECB pricing has shifted from an expected no change this year to rate hikes, and Thursday's meeting will help traders calibrate their bets on how many hikes to expect.
Potential Policy Signals
The ECB announces its rate decision at 1215 GMT. A rate hike is all but certain, but the question for traders is whether President Christine Lagarde offers any indications of how the ECB sees its policy stance evolving later in the year.
Looking Ahead: Upcoming Events
British Economic Data and Bank of England Meeting
A raft of British economic data due next week and a Bank of England policy meeting will give traders in euro/sterling the other half of the picture.
Short-Term Outlook for Sterling
External Influences
Until then sterling is largely reacting to news elsewhere. It was also steady against the dollar at $1.3357.
"With the BoE not meeting until June 18th, sterling should therefore trade off external forces for another session, with the ECB decision, US PPI, and Middle East headlines the likely drivers," said analysts at Monex Europe.
(Reporting by Alun John; Editing by Hugh Lawson)
