Mario Draghi the European Central President said on Thursday that the ECB would look in to a range of stimulus options in order to aid the flagging Eurozone economy. In its policy update last week the ECB decided against a change in interest rates however, stated that they are examining stimulus options including rate cuts, quantitative easing and a fresh round of asset purchasing. This may have led to the EUR to slip to a 2 month low against the USD and a 4 week low against GBP.
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Draghi said that the bank members agreed continued stimulus is best, but debated which elements could be used, “whenever we have a package so complex as this, you’d expect that people have different nuances about the different parts of the package.” Reuters points to expectation of a 10-basis point cut on interest rates in their September meeting, while ING Germany’s Chief Economist Carsten Brzeski eyes a broader loosening of monetary policy stating, “It now looks increasingly looks as if the September meeting will not only bring a single measure but rather a package of several measures.”
The German economic cool-off could be in focus again this week with a window on sentiment amongst both consumers and businesses with the release of Consumer Confidence, Services Sentiment and Business Climate on Tuesday, before retail sales and unemployment figures on Wednesday. As the powerhouse of Europe the German economy’s performance is closely analysed for indication of overall economic health of the Bloc and the second half growth expected in 2019 appears to be a distant memory. “There is far and wide nothing to be seen of the second-half recovery hoped for [in the Eurozone] in many places,” says Commerzbank economist Joerg Kraemer. “Germany is in a grey area between a marked growth slowdown and a recession.”
This week sees a lot of important date releases from the EU including GDP. This is expecting to show a decline in growth to 1pc (YoY) from the previous 1.2pc figure adding further weight to the European Central Banks need for action. Unemployment rate is expected to hold steady at 7.5pc whilst retail sales for June could show an improvement to 1.6pc from the previous 1.3pc.
Despite the waning economic outlook amongst the eurozone the EUR continues to trade in a strong position against GBP as Brexit uncertainty steers investors away from investing in the Pound. Please get in touch with the trading floor at Foreign Currency Direct if you wish to discuss your requirements in more detail.
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