Banking
Sterling Steadies vs Euro After post-ECB Tumble
Published by maria gbaf
Posted on February 8, 2022
2 min readLast updated: February 9, 2026
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Published by maria gbaf
Posted on February 8, 2022
2 min readLast updated: February 9, 2026
Add as preferred source on GoogleBy Joice Alves
LONDON (Reuters) -Sterling steadied against the euro on Monday after a sharp slide last week triggered by the European Central Bank‘s more hawkish tone, which overshadowed the Bank of England’s rate rise.
The euro rose versus sterling last week after the ECB surprised markets by suggesting for the first time that an interest rate rise this year was a possibility.
By 1600 GMT on Monday, sterling flattened against the euro to 84.59 pence, after touching its lowest level against the single currency since December.
It lost some steam against the dollar, flattening at $1.3528, after hitting its lowest level in almost one week versus the greenback.
While a quarter-point hike by the BoE was largely expected, a split vote came as a surprise, as four of the nine Monetary Policy Committee members wanted a 50 basis points move. The BoE also warned inflation could top 7%.
“Last week both the BoE and the ECB were more hawkish than expected though the ECB was the far greater surprise,” said Jane Foley, head of FX strategy at Rabobank in London.
As the ECB provides some more details on its future direction, the pound could recover a little versus the euro, but the dollar’s safe-haven status may keep a lid on GBP/USD this week, Foley added.
ECB President Christine Lagarde told the European Union Parliament on Monday that current price pressures will likely subside before becoming entrenched, enabling the central bank to deliver on its 2% inflation target over the medium term.
Speculators’ net long positions on the pound against the dollar fell to a three-week low in the week to Feb. 1, futures data from CFTC showed.
Traders are also keeping an eye on political developments in Britain, where Prime Minister Boris Johnson has been under pressure over parties held during coronavirus lockdowns.
Simon Harvey, head of FX analysis for Monex Europe, said he expected political risks to have a limited impact on the pound for now “as policy is set to remain on its preset course even if Boris Johnson is ousted”.
(Reporting by Joice Alves; Editing by Alex Richardson, Alison Williams, William Maclean)
Foreign exchange, or forex, refers to the global marketplace for trading national currencies against one another. It is the largest financial market in the world, facilitating international trade and investment.
Currency is a system of money in general use in a particular country. It serves as a medium of exchange, a unit of account, and a store of value.
Monetary policy is the process by which a central bank manages the supply of money, often targeting an inflation rate or interest rate to ensure price stability and general trust in the currency.
Economic growth refers to the increase in the production of goods and services in an economy over time. It is typically measured by the rise in gross domestic product (GDP).
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. Central banks attempt to limit inflation, and avoid deflation, to keep the economy running smoothly.
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