- The European Central Bank disappointed investors who expected an aggressive trend, kept rates unchanged and the APP ended after June.
- An upbeat market mood is also weighing on the underperforming euro, as losses in EUR/USD and EUR/GBP show.
- The divergence between the BoE and the ECB favors the GBP.
On Thursday, the EUR weakened against the British pound after the European Central Bank (ECB) revealed its monetary policy decision and guided market players on the end of its Asset Purchase Program, also known as APP. . At the time of writing, the EUR/GBP it trades below 0.9300 at 0.8278.
US stocks show bearish market sentiment, despite European stocks finishing higher. Meanwhile, EUR/USD was down 0.69% on the day, while GBP/USD trailed the former, falling 0.45%. However, the current central bank divergence, which means that the Bank of England (BoE) is already raising rates while the ECB is about to end its QE program, favors the GBP in the short term.
The ECB keeps rates unchanged and will end QE after June, weighing on the euro
In the European session, the European Central Bank (ECB) kept rates unchanged, while guiding investors, regarding the last three purchases of APP bonds. The ECB said monthly net purchases under the APP would amount to €40 billion in April, €30 billion in May and €20 billion in June.
Market players perceived the statement as dovish amid lack of commitment regarding future adjustments. EUR/USD broke to new yearly lows at 1.0757, while EUR/GBP fell to fresh monthly lows at 0.8249.
Meanwhile, ECB President Christine Lagarde’s press conference provided no further clarification on the rate hike, further amplifying shared currency losses on the day. Lagarde said risks to the inflation outlook were tilted to the upside in the short term, adding that it was very “likely” that the APP would end in the third quarter. The ECB president stated that inflation is being driven by energy prices and has intensified in many sectors. She forecasts that growth will remain weak in the first quarter of 2022.
The absence of the UK economic docket left EUR/GBP traders leaning on Wednesday’s high rate of UK inflation, which topped 7%, and would likely trigger another Bank of England rate hike.
Technical levels
Source: Fx Street
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