Draghi speech undercuts Euro’s value

Mario Draghi, the President of the European Central Bank, is a man who has financial markets listening keenly whenever he is near a microphone. Between now and March he has a decision to make as to whether he should extend quantitative easing in the Eurozone beyond its current March 2017 deadline. Until then, his speeches have a greater impact on buying and selling Euro rates than normal.

Yesterday was the first explicit hint given by Draghi that the ECB’s assistance to the Eurozone economy will be continuing, and may not be tapered off come March, but continue at this extremely supportive pace. The key sentence was that ‘the return of inflation towards our objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap.’ In summation, growth outlook for the Eurozone is better, but to keep the Eurozone economy on track, we’ll very much continue to provide unusual high and intimate support. Unprecedented also suggests this complicated program of printing money will continue in earnest, so the Euro’s value may come under pressure with the notion that a greater supply will be in circulation down the line.

Positive business confidence set to shine for the Euro on Wednesday

Business confidence figures for the Eurozone economy will be released tomorrow morning for the service and manufacturing sectors. These are still overwhelmingly positive, attesting to the comments made by Draghi yesterday, and forecasted to still reflect such sentiment tomorrow morning.

Combined with the risk of the Autumn Statement come Wednesday morning, Euro buyers may be wise to secure the recent gains over the last two weeks. In real terms, a €200,000 is now almost £11,000 cheaper.

If you are in a position to, and have a Euro buying requirement, it may be wise to secure a rate of exchange using a forward contract and eliminate the risk open to your position.

You can contact your account manager here to discuss the parameters of how to secure an exchange rate for up to 18 months and safeguard your transfer from any further adverse movements.

Tomorrow could present a volatile period for Pound to Euro exchange rates, clients may be prudent in getting in touch with our brokers here at currencies.co.uk ahead of the Autumn statement from the UKs Chancellor. Alternatively, if you have any questions regarding todays report you can contact me at jjp@currencies.co.uk.

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