Tomorrow we have the ECB's latest interest rate decision followed by the press conference, investors will be looking to comments made by the ECB regarding future monetary policy. This Euro report discusses the factors affecting the single currency. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points yesterday.
|Currency Pair||% Change||Difference on £200,000|
The Eurozone economy is currently looking impressive with some of the best growth figures in over a decade and it brings up the question is there justification for a cut in Quantitative Easing (QE).
QE is pumping money in to an economy in order to try and stimulate growth. QE is controversial and has mixed results. The US had success when it was put in place in 2008. QE along with low interest rates freed up capital and encouraged steady rises in US share prices.
Japan was not so successful and has had to increase monthly increments in the past due to a lack of consumer spending and low inflation.
The European Central Bank (ECB) program is proving effective despite causing controversy with debt in the trillions.
Current monthly increments are at €30bn following a cut from €60bn last year. If there was a further cut the Euro could be expected to strengthen substantially.
The main thing that is holding back a cut in QE and indeed a hike in Interest Rates from 0% is inflation.
Inflation has struggled in the EU for some time and should we begin to see a steady rise in inflation a cut in QE could be on the cards.
With political uncertainty in both Germany and Italy failing to hit the Euro, it just goes to show how strong the single currency is and the potential for further strength.
Eurozone Gross Domestic Product data is due out today. GDP is the broadest measure of Eurozone economic activity. It is a measure of the total value of all goods and services and as such can influence the market. There is expected be little movement from both quarter on quarter (QoQ) figures and year on year (YoY), with data expected to stay at 0.6% QoQ and 2.7% YoY.
Any movement away from the consensus could cause a swing in Euro value; those with a requirement for Euros should keep a close eye on this release.
Tomorrow we have the ECB Interest Rate Decision. I would be very surprised to see any movement in the rate from 0%, but what could influence the market is the following ECB Monetary Policy Statement and Press Conference. If there is any indication to a cut in QE or a hint at a potential rate hike in the future we could see Euro strength, although I would be surprised considering current inflation levels.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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