Excel Currencies Blog

The ECB stop hiking interest rates for the first time since summer 2022..

GBP v EUR gained 0.3% after the ECB interest rate release and following press conference. There were no surprising outcome to either, but sometimes traders act on concrete results, which is why the Euro has weakened slightly. 

The ECB confirmed its stance that it was not content with the current levels of inflation and stands ready to raise interest rates again if future data surprises. But, they did make reference to the fact that inflation dropped markedly in September and that the underlying picture is continuing to ease.

So the final major central bank has joined the party of 'higher-for-longer' interest rates and now the bets will be placed on who will act first to cut them. Whoever concedes first (likely to be the Fed in Q2 2024), will see its currency come under pressure. 

The soft financial landing has been all but confirmed over in the US after Q3's GDP number came in strong. 4.9% easily beat expectations of 4.3% and so has more than doubled the figure of 2.1% in Q2. Economists are praising the US' resilience to high interest rates which is seeing the economy outperform.

A continued strong economy will see a divergence against the EU/UK and so will be USD positive in the short term, up until the point that the Fed believe inflation is low enough to pull away from high interest rates.