Mario Draghi addresses ECB stance on QE

Mario Draghi the head of the European Central Bank (ECB) spoke yesterday on a number of matters, but the main point of interest was whether there would be any changes to current Quantitative Easing (QE) program. QE is essentially pumping money into an economy in order to stimulate growth. At present current increments are €80bn a month but this due to end in March 2017.

The stimulus has not had the desired effect and inflation is still shockingly low, so what happens after the current QE program ends will be a key barometer as to GBP/EUR buoyancy levels.

Draghi stated that QE was working, indicating that QE would most likely at current levels and so there were no great shakes on the market. I think the current QE program is keeping deflation at bay, but it is not having the desired impact of stimulating growth.

Despite the problems surrounding the UK’s Brexit I am confident the Pound will strengthen in Q3 and Q4 of 2017. Once article 50 is triggered and trade negotiations begin to come through I think we will see Sterling rally. At present levels, it is chronically undervalued. Do not forget the Eurozone has its own problems Greek Debt, inflation, Italian bad loans and the threat of further referendums to name but a few.

Further movements could emerge on Thursday following the UKs GDP estimates, clients buying or selling the Euro may want to get in touch to discuss an upcoming currency transfer. Speak to our trading floor today on 01494 725 353 if you would like to learn more.

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