Draghis speech sees Euro struggle continue

6 March, 2015

Matthew Boyle

Yesterday’s trading was a turbulent one for the majors as the ongoing struggle between the Pound and the Euro continued. Morning German factory orders and Italian GDP data both came in under expectation, but this was offset by poor Halifax house pricing data for the UK and as such there was little movement in GBP>EUR rates. The main focus was on the afternoon reports – the interest rate decision and asset purchase facility from the Bank of England (BoE), followed closely by the Interest rate decision and monetary statement from the European Central Bank (ECB). Little surprise there was no change to UK interest rates and the level of asset purchase remained flat at 375BN, as such the focus moved largely towards the ECB announcement.

Again unsurprisingly there was no change to interest rates (kept at 0.05%) so attention moved towards what Draghi would say in his highly anticipated speech. In his early comments he caused the Euro to strengthen stating that looking ahead he expected economic recovery to “broaden and strengthen gradually”. This combined with a revision to the growth forecast for the year to 1.5% from a predicted 1% in December, and up to 1.9% for 2016 from a previous 1.5% saw the Euro steal 0.5 of a cent quickly against the pound and similarly against the Dollar.

However these gains were almost immediately eroded amidst announcement of the 60 billion a month ECB Q.E programme starting on March 9th alongside further uncertainties over the ongoing Greek situation. By the end of Draghis speech Euro rates against the majors had returned close to their open levels after seeing around a cent swing up and down in GBP>EUR and EUR>USD crosses during the announcements.

Today we have a raft of minor EUR releases in the morning, however the main focus will be on 3 main pieces of data – UK Consumer inflation expectations, Eurozone GDP, and in the afternoon US non-farm payrolls. So once again we see the majors go head to head on the last day of what has been an exciting week. As the Euro keeps battling to find strength against both majors the USD is playing its part in effecting GBP/EUR rates. With 3 major pieces of data from the 3 majors today we may be in for a bumpy ride!

So if you have any upcoming transfers to make involving any mix of these pairings stay in close contact with your Currency Index account manager to avoid getting caught out by any sudden movements in what is a particularly volatile time in the market.