The Euro has lost considerable ground against both the Pound and US Dollar following the Trump Presidential win. USD/EUR has now fallen a to a 9 month low whilst the Dollar has fallen to a seven week low against the Pound. It is widely perceived that European Central Bank (ECB) President Mario Draghi will now seek to extend its asset purchase scheme which is scheduled to end in March 2018. There has been much talk that the ECB has not done enough to breathe life into the Eurozone to stimulate both growth and inflation.
This Trump win could now be the trigger for action. Any extension of Quantitative Easing is likely to be negative for the Euro, the question though is how much of this news is already priced into the market. Any decision from the ECB to extend the programme in my view is likely to see the Euro weaken.
Mario Draghi will be speaking on Friday where clues may be given as to the future direction of the ECB. However it will be the next ECB meeting on December 8th when any announcements are likely to be made. A six month extension seems the most likely course of action. The persistent low level of inflation was just 0.5% in October, well below the 2% target which has been missed for three years is proof that more needs to be done.
Meanwhile German Minister Volker Bouffier will be meeting US banks this week to discuss options if they wish to retain access to the single market. The Minister has also stated he would like to see negotiations that would not permit the UK access to the common market. A heavy stance on negotiations from the EU could see the Euro make gains against the Pound going forward.
EU GDP data for the third quarter is released this morning which could be a market mover although no change is expected from the previous quarter.
If the ECB act in extending its QE programme, history tells us that the Euro is likely to weaken presenting opportunities for Euro buyers. Speak with our team today or email me here if youd like to learn more.
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