Central Bankers Guide The Markets

9 May, 2014

Simon Eastman

Yesterday was all about the policy meetings for the Bank of England and the European Central Bank and despite some low key data in the morning, this is what investors and traders were waiting for.

The day started off with German industrial production, UK Halifax house price index and Swiss inflation figures, all of which missed their respective forecasts. Of the major currencies, it was only sterling that showed any decline as it trailed slightly from the previous day’s close.

Come midday and the BoE policy report was released with no change to rate or asset purchase program and so with the ECB decision in mind traders started selling the pound. The ECB decision came and went without change but it was the press conference later which brought the volatility. Initially the statement was euro positive and we saw the single currency rally with pound/euro exchange rates dropped to the low of the day, losing half a cent and euro/US dollar gaining nearly the same. But once the financial press started to ask questions, Mario Draghi dropped the bombshells, “euro strength is a serious concern” and “we’re comfortable with easing in June”. On that note, the euro crashed and the rest of the day saw it lose over a cent to the pound and nearly a cent and a half against the greenback.

Overnight the RBA, Australia’s central bank released their policy statement which didnt give any surprises, commenting on the weaker currency in recent months will help achieve balanced growth and slightly upgraded its view on the labour market. The exchange rate for changing sterling to the Aussie dollar had little variation from this news.

Today we have German trade balance, UK industrial and manufacturing production as well as trade balance and the NIESR GDP estimate, along with Canadian employment figures which are key and could help the Loonies recent strong rally so bear in mind anyone looking to transfer money to Canada.

With the pound at the best levels this year against the euro and just shy of a 5 year high against the US dollar there is no better time to be buying your currency. With the amount gained recently we could well see some correction so give one of the brokers at Currency Index a call today to discuss making the most of your pound.