The euro weakened against the pound and US dollar yesterday, with GBP/EUR Interbank levels breaking past 1.09 for the first time this week. This mostly likely attributed to better than expected UK Retail Sales figures released yesterday, helping the pound to strengthen against the euro.
Olli Rehn, one of the European Central Bank’s (ECB's) rate-setting committee members spoke yesterday to the Wall Street Journal and provided some further suggestions regarding the central banks plans on increasing stimulus measures in an attempt to boost the European economy. The new package will be announced in September, and Rehn told the WSJ (Wall Street Journal) that this could surpass investor’s expectations. Rehn said ‘It’s important that we come up with a significant and impactful policy package in September’. These could include ‘substantial and sufficient’ bond purchases, and further cuts to Interest Rates. However, historically a cut in interest rates has negatively impacted the value of the euro, and as analysts are expecting a 0.1% cut in interest rates, along with a €50 billion a month bond purchasing programme, there could be euro volatility next month if this is the case.
Looking at data releases next week which could impact euro exchange rates, Consumer Price Index figures for July will be released at 10am on Monday and will provide an overview of current Inflation levels. This is something which is monitored closely by the European Central Bank and may create movement on euro exchange rates. On Thursday, Markit will release its Manufacturing, Services and Composite Purchasing Managers Index figures for Germany, along with Composite readings for the whole of the Eurozone at 8am. Expectation is for an improvement on the previous month’s readings.
At 12.30pm on Thursday the ECB will then release its latest Monetary Policy Meeting Accounts, which could provide some forward guidance on the bank’s plans next month for additional stimulus measures. GDP figures earlier this week were released showing little to no growth, with Germany’s GDP showing a contraction at just 0.1%, therefore any signals towards an improving economy during next weeks releases could help the euro to regain some of the losses seen yesterday.
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