EUR/GBP: the euro regains height in the face of Lagarde’s change of hawkish tone

Euro jumps after Chritisine Lagarde’s hawkish change of tone

EUR/GBP has been recovering since Monday after a rocky week. The euro is regaining ground against its British counterpart thanks to a drastic change in tone from Christine Lagarde, who said on Monday that the institution should exit negative rates by the end of the third quarter.

The President of the ECB nevertheless advocated an accommodative monetary policy at the start of the year and a slow monetary tightening just a short time ago. After the governor of the Banque de France, it is therefore the former director of the IMF who joins the voices of the members most in favor of a rapid tightening of the monetary policy of the central bank to fight against inflation.

Market operators are now anticipating a first rate hike by the ECB of 25 basis points in July, a second in September and a third in November. The key ECB rate should thus reach around 0.5% by the end of the year.

Across the Channel, the Bank of England also got tough on soaring inflation, despite officials’ growing fears over economic growth. The central bank is expected to continue raising rates at a steady pace in the coming months, but given that traders have already been preparing for this for several months, it seems unlikely that the BoE will surprise traders with a more hawkish rhetoric. provided that. The single currency therefore seems more likely to outperform the pound sterling in the coming months than the reverse.

EUR/GBP daily price chart – key levels


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