No change to interest rates or Quantitative Easing (QE)... For now

The main headlines from the currency market yesterday were dominated by the single currency following the European Central Bank interest rate decision and Mario Draghi’s subsequent press conference. Interest rates were kept on hold and there was no change announced to the ECB’s asset purchase scheme, which is set to run out in March, but the Euro slumped to a four-month low against the Dollar, whilst managing to hold its ground against a struggling Pound.

In their statement following the decision, the ECB hinted that their Quantitative Easing (QE) program could be extended beyond it’s March 2017 deadline if it deemed necessary. QE is the injection of money in to an economy through the use of government bond purchases in an attempt to boost lending and therefore consumer spending. Its use has historically weakened the currency in question as the increase in supply reduces demand.

When should I buy Euros?

Draghi also hinted that the ECB could make adjustments to their current policy as early as December, and if that’s the case we could see some spikes to take advantage of for any clients with a Euro requirement. In my opinion, any clients who are selling Euros to buy Pounds, now may be the best time to move whilst we are so close to a 5-year high to buy Pounds. Anyone with a Euro sale in to Pounds is currently almost 15% better than before the referendum in June and a €200,000 sale is now over £25,000 more valuable. With potential pressures on the horizon for the Eurozone in the form of French and German elections, the Italian referendum in December, as well as potential changes to monetary policy, we could see the Euro’s run against the Pound come to a halt.

This afternoon sees the second day of Theresa May’s first EU summit in Brussels. She has already commented that she is keen to maintain a strong relationship with the UK and this has been echoed by the head of the European Commission, Donald Tusk. Any clients with a Euro requirement should keep an eye on developments from the summit as a strong relationship with the UK will be crucial to the strength of the single currency’s economy. There are also consumer confidence figures this afternoon which are expected to show a fall, so we could see a spike for Euro buyers to pounce on.

Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them. You can contact me at rjh@currencies.co.uk.

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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.