European currencies pause ahead of ECB policy meeting

The euro remained largely unchanged, consolidating ahead of Thursday’s highly anticipated European Central Bank policy meeting

European currencies traded within narrow ranges on Monday, as improving risk appetite and a late-session reversal in oil prices offset earlier anxieties over persistent geopolitical tensions in the Middle East.

The British pound managed to inch upward on the day, drawing independent strength from localized political developments.

Sentiment in London was bolstered as newly anointed Labour leader Andy Burnham prepared to officially take office as Prime Minister and unveil his cabinet. Markets expressed notable confidence following widespread reports that Home Secretary Shabana Mahmood is set to be named Chancellor of the Exchequer.

City investors reacted favourably to the prospect of a fiscally pragmatic figure heading the Treasury, providing a stabilizing floor for sterling ahead of the crucial autumn budget.

Meanwhile, the euro remained largely unchanged, consolidating ahead of Thursday’s highly anticipated European Central Bank policy meeting.

Investors are positioning for relatively hawkish commentary from ECB policymakers, who are widely expected to keep interest rates steady at 2.25% but retain an aggressive data-dependent posture for the autumn.

Foreign exchange markets are also looking ahead to next week’s U.S. central bank policy meeting. Fed funds futures imply an 85.6% probability that the country’s policymakers will leave interest rates unchanged at the conclusion of their July 29 session.

The dollar index was steady at 100.76.

The index eased after snapping a three-day safe-haven rally that had been ignited by the war in the Middle East. Lower U.S. Treasury yields, following a batch of softer inflation data last week, also applied mild downward pressure on the dollar, even as broader geopolitical risks lingered.