Euro cheaper as ECB discusses more QE

The Euro weakened significantly yesterday, giving us the best rates for buying the single currency since mid-August. The move came as ECB President, Mario Draghi, said that the bank would “re-examine” its Quantitative Easing programme at its December meeting – a clear hint that further economic stimulus will be introduced to help the flatlining Eurozone economy.

Mr Draghi also hinted that Eurozone interest rates would remain very low, and might even fall further, increasing the cost to other banks to deposit money with the ECB.

These comments made the Euro cheaper for 3 reasons. Firstly, QE increases the physical amount of a currency in existence, and this dilution reduces its value. Secondly, low interest rates are a turn-off for investors, who move their money elsewhere, reducing demand for the single currency. And third, the fact that more QE is even being touted is a sign that the underlying Eurozone economy is still not performing very well. No wonder then that we saw the cost of the Euro fall by 1.5% in trading yesterday.

More data this morning

We have more Eurozone figures due out at 9am, with the services and manufacturing figures announced then. Other than that we have a fairly quiet day with only Canadian Inflation at 1.30pm, so today could be a good opportunity to reserve a rate for your currency before a new week.

For those of you in the UK and Europe, don’t forget that the clocks go back this weekend, and while we can’t turn the clocks back to give Euro rates above 1.40, the prices we are seeing now could be as good as we get for the foreseeable future.