James Lovick
Associate Director
Euro Continues to Strengthen
Mario Draghi is delivering a speech today in which he could attempt to jawbone the Euro to keep EU exports competitive and support the EU recovery.
Request a quoteWith the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table shows the difference in Euros you would have achieved when buying £200,000.00 during trading yesterday.
| Currency Pair | % Change | Difference on £200,000 |
|---|---|---|
| GBP/EUR | 0.45% | €1000 |
Is the Euro too Strong?
Today is likely to see a particularly volatile day for Euro exchange rates when the European Central Bank (ECB) meet this afternoon and ECB President Mario Draghi holds his routine press conference.
The last few meetings have seen considerable Euro strength as the markets have taken his words as a signal that there will be a tapering of its asset purchasing scheme in the very near future, in the “fall”. So strong has been the market reaction that on two occasions the central bank has been forced to intervene having made official statements highlighting that there has been an overreaction to his comments. As such there is every chance the Euro could make gains if any tapering clues are in fact offered today.
However considering the recent strength of the Euro, Mario Draghi is unlikely to want to jump the gun which would result in further strength for the Euro. There are concerns that a strong Euro could dampen the EU economic recovery by making its exports less competitive whilst also lowering inflation. It seems more likely in this climate that any tapering will be offered at the next meeting. In the meantime he is likely to cite the strong Euro as unwelcome and effectively talk down the currency, something we refer to in the industry as jawboning. This could have the effect of seeing the Euro weaken although judging by previous meetings the markets are unlikely to be convinced - it is just a matter of when the tapering happens. Judging by the rapid turnaround in the EU economy this year, the ECB cannot go on indefinitely without making change.
EU Gross Domestic Product numbers (GDP) for the second quarter are released this morning and a strong number this will only help support the view that any tapering should be imminent which will start to unwind the massive Quantitative Easing programme the ECB embarked on. However the markets are more likely to be interested in the UK parliamentary debate and ECB rate decision.
Thank you for reading my Euro currency report, if you have any questions about an upcoming transfer I would be more than happy to discuss them – you can contact me with any queries on 01494 725 353 or email me here.
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