Sterling falls against the euro following the release of ECB minutes.

Sterling falls against the euro following the release of ECB minutes.

Sterling fell against a stronger euro on Thursday, as the minutes of the European Central Bank’s March meeting were more hawkish than expected.

At their March 10 meeting, ECB policymakers appeared eager to reduce stimulus, arguing that conditions for raising rates had either been met or were about to be met, according to meeting accounts.

The pound, which had surged to an almost two-week high of 83.15 pence versus the euro in early London trading, fell 0.25% to 83.56 pence at 1355 GMT. (EURGBP=D3)

“The minutes of the ECB’s March policy decision had a ‘hawkish tilt …(and) the EUR staged a moderate rally”, said Stephen Gallo, European Head of FX Strategy at BMO Capital Markets.

The euro’s recent weakness against the pound was influenced by the upcoming French elections, with eurosceptic, far-right candidate Marine Le Pen closing in on President Emmanuel Macron in the polls.

This added to the jitters that have been weighing on the euro since the start of the Ukrainian conflict.

“The single currency is more vulnerable to energy security concerns than the pound, but there is also some nervousness in the market ahead of the first round of the French election this weekend,” said Jane Foley, head of FX strategy at Rabobank London.

Versus the U.S. dollar, the pound flattened at $1.3074, after touching a three-week low in the previous day against the greenback (GBP=D3).

According to Foley, there are “few signs of the pound making any significant headway against the USD, with the latter having been boosted this week by yet another hawkish step up from the Fed.”

Meeting minutes revealed that Federal Reserve officials saw large rate hikes as appropriate at future meetings, particularly if inflationary pressures intensified.

Huw Pill, Chief Economist at the Bank of England, said on Thursday that quantitative easing may be the wrong tool to deal with future bouts of bond market turmoil, especially given the current level of inflation.

Bullard: Labor-force improvements are not occurring quickly enough to reduce inflation.

The labor force in the United States is not growing fast enough to aid the Fed’s immediate battle against inflation, according to St. Louis Fed president James Bullard, dismissing the hope that a flood of new workers will improve the supply of goods and ease wage pressure.

“We’re bringing people back into the labor force, but it’s a slow process that isn’t happening at a high enough frequency to help us on the inflation front,” Bullard said.

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