The Pound Sterling reached its highest level against the Euro in 21 months on Wednesday, closing at 1.1759. This marks the highest daily finish since August 2022, driven by a recovery in global equity markets, which typically benefits the risk-sensitive Pound.

However, the Pound faces potential challenges today due to the European Central Bank's (ECB) decision. Euro exchange rates will be under scrutiny as the ECB cuts interest rates and provides guidance on the timing of the next cut. While the June cut has been anticipated for weeks, the focus for currency markets will be on when the subsequent cut might occur.

Markets indicate low odds of the ECB delivering a follow-up rate cut in July, as a recent rise in inflation is expected to prompt the ECB's Governing Council to proceed cautiously.  The concern is that cutting rates too quickly and too significantly could exacerbate inflationary pressures.  ECB President Christine Lagarde might express concerns about inflation while acknowledging that the Eurozone's economy has shown improvement since the last meeting.