ith almost every major central bank, barring the Federal Reserve, now looking on course to ease monetary policy this year following last month’s Brexit vote, the US Dollar has benefitted in the past few weeks. This has been enhanced by a raft of strong US economic data.

The currency markets will now be squarely focused on the European Central Bank, which will be announcing its latest interest rate decision at 12:45pm UK time.

However, we do not expect much from the European Central Bank today, with President of the ECB Mario Draghi likely to stand pat on monetary policy. The central bank will reiterate its ‘wait-and-see’ stance, holding off for additional economic data before committing to extra stimulus measures.

Draghi could instead hint at a move later in the year, possibly as early as the ECB’s September meeting in a few months’ time. An explicit signal for a September move would provide a significant downside risk for the Euro today and could drive the single currency comfortably back through the 1.10 mark against the US Dollar.

Prior to today’s ECB meeting, the Pound strengthened against most of its major counterparts, buoyed by a survey released by the Bank of England yesterday morning that showed no clear evidence of slowing economic activity post-Brexit.

Among emerging market currencies, Turkey’s Lira continued to receive a pounding yesterday, falling to a new record low after S&P slashed the country’s sovereign credit to BB/B and lowered the outlook from ‘stable’ to ‘negative’.

Major currencies in detail:

GBP

The Pound strengthened 0.7% against the US Dollar following Wednesday’s BoE survey, although remains lower for the week.

Sterling was also relatively well supported by a slightly better-than-expected labour report in the UK yesterday. The jobless rate will be particularly good news for the Bank of England, as it dipped to an eleven year low at 4.9%, while average earnings were more-or-less unchanged at 2.2%. Of much greater importance for Sterling will be the labour figures for July, given the timing post-Brexit result.

UK retail sales for June this morning will take into account some of the post-Brexit impact, so will be worth keeping an eye on. Sales are expected to have slowed last month for the first time since March.

EUR

The Euro continued to trade within a relatively narrow band on Wednesday, with investors in a cautious mode ahead of today’s ECB announcement.

Consumer confidence in the Eurozone fell again this month, with sentiment among individuals in the single currency bloc now at a three month low following last month’s shock Brexit vote. The index from the Conference Board dipped to -7.9 from a revised -7.2, reinforcing our belief that the Brexit vote will have a negative impact on economic activity in the Euro-area.

The ECB’s rate decision this afternoon will be followed by Draghi’s press conference at 13:30pm UK time.

With the ECB unlikely to say anything supportive for the Euro this afternoon, we expect the single currency to trend lower over the coming weeks. However, as expectations for today’s meeting are low, we’re not expecting any major moves in the Euro today.

USD

Despite edging to its strongest position in four months against its basket of currencies, the US Dollar ended unchanged against its major peers yesterday, with all eyes on today’s ECB meeting.

Despite no major announcements in the US yesterday, the Dollar was relatively well supported after a string of relatively impressive economic data earlier in the week. This has caused investors to continue to bring forward their expectations for the next interest rate hike by the Federal Reserve, with financial markets now placing around a 50% chance of a hike by the end of the year.

We’ll see a raft of economic data out of the US this afternoon. Initial jobless claims and the housing price index will draw the main attention among US Dollar traders.

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