EUR/GBP reverses 100 pips higher from sub-0.8300, multi-year lows as Lagarde opens door to 2022 rate hike By Frank_Macro EURGBP ECB BOE
EUR/GBP reversed 100 pips higher from just above late-2019/early-2020 lows in the 0.8280s after hawkish ECB commentary.
President Lagarde refused to repeat her previous assertion that a rate hike in 2022 is very unlikely.has reversed sharply higher from its initial post-BoE session lows in the 0.8280s, where the pair came within a whisker of hitting multi-year lows from back in late-2019/early-2020, and now trades in the 0.8380s. That means the pair, having been as much as 0.5% lower on the day, now trades 0.75% higher.
Market participants interpreted these comments from Lagarde as opening the door to a rate hike sometime later in 2022, boosting the euro substantially. Indeed, Bloomberg just report that, according to sources, the ECB is prepared to recalibrate its policy guidance at the March meeting when it releases new economic forecasts, with policymakers reportedly in agreement that it is not sensible to exclude the possibility of a 2022 rate hike.
Recall that sterling was boosted prior to the ECB’s rate decision after the BoE hiked interest rates by 25bps and revealed that four out of nine rate-setters had actually wanted a larger 50bps move. EUR/GBP is now eyeing a test of the 0.8400 level. As the ECB tightening narrative gains more traction and tightening bets build, this could be a catalyst to disrupt EUR/GBP’s steady grind lower in recent months.
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