The pound appears rangebound against the euro this morning as the single currency remains buoyed by Mario Draghi’s talk of a “vigorous pick-up in underlying inflation” in the Eurozone.
Speaking at the Economic and Monetary Affairs of the European Parliament hearing in Brussels yesterday afternoon, the European Central Bank (ECB) President also appeared confident that wage growth will begin to pick up in the near future.
Mr Draghi said yesterday: “Underlying inflation is expected to increase further over the coming months as the tightening labour market is pushing up wage growth.”
Lending further support to the euro this morning is speculation that Mr Draghi’s unusually hawkish comments could indicate the ECB may hike interest rates as early as September next year, rather than possibly December 2019 as initially forecast.
In a note to clients analysts at Danske Bank wrote: “Draghi said that the ECB sees ‘ a relatively vigorous pick-up in underlying inflation’, which is really hawkish from Draghi, as he never chooses words by accident.”
At the same time, yesterday’s rally in the pound appears to have run out of steam this morning.
The pound is trending narrowly against all its major peers as traders remain cautious in light of the recent Brexit turbulence.
Looking ahead, barring any major political developments, movement in the pound euro exchange rate on Wednesday is likely to be driven by the Confederation of British Industry’s (CBI) distributive trades index.
Economists forecast the survey will report that retail activity in the UK slowed this month, with a slide from 29 to 16.
Meanwhile euro investors are likely to look to Thursday and the release of the Eurozone’s latest business confidence figures.