ECB QE program update pending

News within Europe has been fairly muted recently with the focus on the US elections and the UK, as they try and define the next steps following the referendum. There has been claims that European member states have been making a bid for some of the 100,000 financial jobs in the city which are at risk of relocation.

The British Banker Association (BBA) warned only on Friday that there was a threat of Banks relocating next year as fears mount, however David Davis, the Brexit minister, warned Europe not to use the Brexit to weaken the City of London. Personally I think this unlikely as no cities can match London with its GMT time, connections to the US and indeed English being the language of business. Instead I think this to be a tactic by the large banks to create a negotiation point trading further tax reliefs in return for staying. Perhaps a few hundred jobs may be lost to Paris or Frankfurt over the next 18 months but I suspect for only a short period of time.

The main talking point and indeed news story which is impacting the value of the single currency has been the European Central Bank’s future central policy change on their QE program. Eurozone banks have reported that the negative interest rate policy of the European Central Bank (ECB) is further harming profit margins. It is currently scheduled to finish in March of 2017, however the bank seems to be sending out mixed messages to the markets about its future. Some members of the ECB are suggesting it could be extended until September of next year where others have suggested it could be tapered (slowed down). These contrary forecasts are causing a lot of volatility in the value of the Euro as one suggests that the economic health in Europe is improving and the other suggests it is still at risk.

Mario Draghi, the head of the ECB, is speaking later this afternoon and the main talking point will certainly be with regards to this topic. It is an event which could easily move the price of GBP/EUR upwards of a cent when added to the press conference being held by Mark Carney the head of the Bank of England only an hour earlier.

Today is in my opinion the most important day for anyone with a GBP/EUR exposure for the next 10 days. If you would like to be kept up to date with breaking news through today, please register your interest by getting in contact with your personal broker here.

Longer term we have a host of German data due on Wednesday and GDP figures from France and Spain on Friday. However, I expect the price of the Euro to be driven by news elsewhere, including the UK GDP figures on Thursday afternoon and US data throughout the week.

With further movements likely if Mario Draghi hints at policy changes today, why not speak to our brokers ahead of the event on 01494 725 353 to discuss your requirements.

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