Pound traders are currently waiting for the midday Bank of England (BoE) monetary policy meeting to take place.
Another factor limiting Sterling trade has been a warning from Chancellor Philip Hammond that a no-deal Brexit could cause major UK economic damage.
Speaking yesterday, Mr Hammond said: “The potential of a no-deal exit, with high disruption as a consequence, is clearly a risk to the financial system.”
Concerns about a no-deal Brexit have devalued the pound in previous weeks because of the fear that such an outcome could be the most likely conclusion to Brexit talks.
Recent weeks have brought a restoration of GBP trader optimism, however, following supportive statements from EU Chief Negotiator Michel Barnier.
Euro traders have had a slow start today, with German inflation readings showing a dip in August.
The finalised figures disappointed EUR traders as they revealed a slowdown for all readings except the base annual printing which has remained at 2 per cent.
Slower German inflation risks causing a Eurozone-wide reduction in inflation rates, which will lower the likelihood of a near-term European Central Bank (ECB) interest rate hike.
Euro traders have been waiting for higher interest rates from the ECB since 2016, so today’s German data has done little to push the euro up against the pound.
Looking ahead, the pound to euro exchange rate could turn volatile when the Bank of England (BoE) reveals its monthly interest rate decision at noon today.
BoE officials aren’t expected to adjust interest rates from their current level of 0.75 per cent, so GBP traders will be more focused on the bank’s minutes.
These reveal a precise breakdown of votes among policymakers and can also provide hints of when BoE officials are considering an interest rate hike.
If the minutes point to a 2019 interest rate hike being a likelihood then the pound could rise sharply against the euro.
In a similar situation, the European Central Bank (ECB) will also be holding its monthly interest rate decision today.
As with the BoE, interest rates aren’t expected to be adjusted but the euro could still appreciate on any future forecasts.
The main event will be ECB President Mario Draghi’s press conference in the afternoon, which could bring hints of a change in the ECB’s economic outlook.
Even a sniff of an interest rate rise from Mr Draghi could be enough to boost the euro today, as the ECB President is known for causing significant currency movement with even minor remarks.