We have an important week ahead for the euro with the latest ECB (European Central Bank) meeting on Thursday. Historically, the ECB meetings which take place every 6 weeks, can be a time of movement on Euro exchange rates, as investors react to any changes in monetary policy or outlook, resulting in changes in the euro’s value.
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This week’s meeting might carry some extra interest, following mounting speculation the ECB will be considering some change in policy as a result of sluggish growth in the region. Reuters reported last week that money markets were pricing in a 60% chance of a 0.1% cut in interest rates. Typically, the lowering of interest rates may see a currency movement since by offering less return, it makes it less attractive to hold.
The mixed potential could add to the volatility here as the market reacts to the news. In these situations, the reaction can be leading up to, at the time of and after the decisions, so if you are planning any euro exchanges ahead this may be a release to be aware of in advance. For more information on this important event and other news on the euro you may wish to contact one of our team. Markets often move ahead of the event and the prospect of a cut has seen the euro weaker lately.
Economic theory might suggest a cut in rates might therefore be a reason for euro movement, whilst refraining from a cut may see euro strengthen. However, this is by no means guaranteed and the behaviour of the euro may also be linked to any changes in sentiment ahead of the release. With ECB meetings too, it is often the 13.30 Press Conference where we learn the most, as President of the ECB Mario Draghi and his team gives an assessment of the decision.
With the market quite mixed in its view of what may or may not happen, the Conference might be more telling in providing a basis for the decision and what lies ahead. Other news on the euro is on Wednesday with the latest Markit Composite PMI (Services and Manufacturing) data. Speak to our team to learn more.
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