Worries of a slowdown in the US economy triggered a steep sell-off in USD, thereby supporting the Euro. Instead, the US economy expanded by only 2%. Economists expected quarter-on-quarter GDP to ease from 6.7% in the second quarter of this year to 2.7% in the third. The Euro has also been boosted by its strong negative correlation to the US Dollar (USD), as US GDP growth slowed by more than anticipated.
…and what are markets doing?Pricing an even earlier liftoff /FueDM7Xs23- Antoine Bouvet October 28, 2021 This has raised bets for an earlier tightening of policy from the ECB, even though Lagarde pushed back against this saying traders’ expectations didn’t match the bank’s forward guidance.
However, Lagarde conceded that inflationary pressures seem to be more persistent than initially thought. (Updated 15:10, 28/10/21) The Pound Euro (GBP/EUR) exchange rate suddenly dropped by €0.005 in a matter of minutes as the European Central Bank’s (ECB) policy meeting began earlier this afternoon.Īs ECB officials convened for the bank’s interest rate decision, the Euro (EUR) spiked across the board.Īlthough the ECB left policy unchanged and struck a broadly dovish tone following the decision, the single currency has so far managed to hold on to most of these gains.ĮCB President Christine Lagarde reiterated the bank’s view that inflation is temporary, citing three key factors: surging energy prices, global demand outpacing supply, and the low base effect of Germany’s VAT cut last year. Pound Euro (GBP/EUR) Exchange Rate Plunges as ECB Meeting Gets Underway
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