Recent ECB inaction protection

Tomorrow is the key event in the marketplace this week for anyone with an interest in buying or selling Euros – the European Central Bank interest rate decision and subsequent Monetary Policy Statement and press conference. Many of my own customers with a buying Euro requirement have been frustrated that the multitude of news out concerning some of the short-comings of the Eurozone economy have not registered much in the value of the Euro.

As I have said to them, you can lay the blame squarely at the feet of Mario Draghi, the President of the European Central Bank.

Investors look to the actions of Central Banks to decide just how dire a situation truly is, and so far, since the news was released on the feeble status of Italian banking, and the recent scares of Deutsche Bank fine requirements, the ECB have sat on their hands.

Will tomorrow see the Euro weaken with some surprising announcements?

Frankly it’s unlikely. The reason why markets are expecting some form of action at some point is that the ECB’s emergency quantitative easing program which began last year will run out by March, and they have to decide whether they need to continue it. If this is confirmed this will likely caused a similar deterioration in the Euro’s value compared to last January and finally admit to markets that the ECB are worried about the long-term prospects of the Eurozone economy.

Positive inflation figures for the Eurozone released on Monday however, suggest that Draghi does not need to be hasty and may continue to hold fire and see how the aftermath of the Brexit vote unfolds and make a decision later in the year.

In the past this has spelt slight Euro strength when such emergency action is staved off, so if Euro sellers are aiming for an opportune moment this week, Thursday lunchtime could provide a period of opportunity to counteract a currently strengthening Pound. Call our trading floor on 01494 725 353 if you would like to know more on how this could impact your requirements.

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