Precise Investors

Tuesday, December 7, 2021

Pound falls despite European Central Bank announcement

The pound started off the week low despite announcement by the European Central Bank last week that interest rates will remain the same

The continuing uncertainty over the terms on which the UK will leave the European Union and the UK’s decision to leave the customs union, saw the pound struggling to see much improvement last week. The pound suffered over the weekend starting off the week trading in the region of £1.1366 against the euro. It suffered against the euro over the weekend despite its rise last Friday.

The pound failed to retain its recent gain despite announcement by the European Central Bank last week that interest rates will remain the same. Interest rates have stayed the same with the Eurozone seeing a lending holding rate of 0.25 per cent.

The pound surged last Friday and traded in the region of £1.150. Earlier, pound’s 11-month high ended two weeks back amid brexit uncertainty and the Downing Street announcement that the UK will leave the customs union.

ECB president Mario Draghi said that incoming information since its meeting in early March points towards some moderation, while remaining consistent with a solid and broad-based expansion of the euro area economy. This moderation may, in part, reflect a pull-back from the high pace of growth observed at the end of last year, while temporary factors may also be at work.

Mario said that overall, however, growth is expected to remain solid and broad-based.

A currency analyst at TorFX, Laura Parsons, said last week that the ECB’s decision had a positive impact on the pound. She said the GBP/EUR exchange rate bounced around half a cent higher on Thursday, briefly pushing beyond €1.150 in the wake of the European Central Bank’s (ECB) latest interest rate decision. The ECB was as dovish as expected, although President Mario Draghi was quite optimistic about the economic outlook.

However she later added that the pound could take a tumble later today if the UK’s latest growth figures are revised lower and the pound indeed tumbled later.


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