The European Central Bank (ECB) met yesterday and held interest rates as widely expected. The Euro however came under immediate pressure after it was announced that the ECB will conclude its tapering of its Quantitative Easing programme by the end of the year. The table below shows the difference in Euros you could have achieved, based on the change in exchange rates throughout trading hours yesterday.

Currency Pair% ChangeDifference on £200,000
GBP/EUR1.2%€2,780

The ECB has committed to reducing the taper down from €30 billion to €15 billion in the last quarter of 2018 and conclude all its bond purchases. The Euro fell instantly on the news and took its biggest one-day loss since March of this year. Clients looking to buy Euros have been given a sizeable boost but for those selling the outlook has quickly deteriorated.

The ECB went one further and offered very clear forward guidance by indicating that interest rates would remain at their current lows until December 2019. The move has been seen as negative for Euro exchange rates with no prospect of an interest rate hike for well over a year. Considering the US has raised interest rates seven times in the last 4 years and the UK is likely to hike again later this year puts the EU on a very different path for interest rate policy compared to its counterparts.

outlook for the radio

Euro Outlook

The Euro appeared to have found some support following the recent volatility stemming from Italy which has now settled for the time being. The fact that the newly formed government has made clear its intention to stay in the Euro has proven beneficial for Euro exchange rates. However, the Euro faces a number of challenges in these coming weeks and months which could make for a tough period for Euro exchange rates. The economic outlook is still not great with concerns over economic growth for the bloc. More pressing is the developing trade war between the US and EU which could have major implications for growth. There is also the likelihood of political tensions stemming from Italy over tax cuts and increased government spending both of which clash with EU policy.

EU Consumer Price Index inflation data is released this morning and should impact on the Euro. Expectation is for a small tick up to 0.5% on the month which should be seen as positive for the Euro and welcome news by the European Central Bank (ECB). The ECB continues to battle with weak growth and low inflation and so any improvement in the inflation department should be good for the Euro. EU trade balance data also released this morning and a speech from Benoit Coeure could also impact the Euro today.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.