ECB announcement dominates last week a look to the week ahead

14 March, 2016

Matthew Boyle

Last week was largely dominated by Thursdays ECB announcement, which saw them cut the interest rate to 0% and increase their Q.E programme from €60B to €80B a month. Many had suspected a change to the deposit rate but not foreseen the change to the overall interest rate combined with an increase to the current lending programme. This shock move saw an even bigger surprise as in a move that would normally suggest that a currency would weaken we saw the rates drop by 3 cents – something that was almost the polar opposite of what was expected to happen. In part this is explained as Draghi has been said to have “thrown the kitchen sink” at it on this occasion promising no further cuts to the interest rate. In what many have seen as a particularly bold move and one which may allow the ECB to edge ahead of the other central banks saw the Euro in fact strengthen. This in turn caused GBP >USD rates rise as the see-saw effect between USD>EUR as we have discussed previously took hold, with the Euro strengthening by 1.5 cents following the announcement before the week’s close.

Given that this was perhaps the last main event on the horizon as it stands prior to the UK referendum in June, we may have seen the last opportunity for GBP>EUR rates to rise. It is likely with the uncertainty for the UK in the coming months it will be able to establish any ground to find strength. So any of you with upcoming Euro requirements in the next 6 months or potentially more would be well advised to get in touch soon. It is fully expected that as we approach June rates will drop further and following that it is a gamble as to whether we will stay or leave Europe and if the rates will recover. If so how long this may take is another unknown. So give Currency Index a call today if you want to avoid the impending potential “Brexit” risk and would like to secure a rate before we potentially see the rates tumble.

This week starts and ends fairly quietly but is still a very busy week for major ecostats, and will provide an interesting watch to see how GBP/EUR /USD rates react following last week’s announcements.

Elsewhere in the world we have important releases for JPY, CHF and NZD and AUD to name a few so those of you with requirements in these currencies may like to keep in close contact with your account manager.

10.00 EUR Industrial Production
19.00 NZD RBNZ Glenn Stevens speech

00.30 AUD RBAs meeting minutes
03.00 JPY BOJ Monetary policy statement and Interest rate decision
06.30 JPY BOJ Press conference
12.30 USD Retail sales

08.00 EUR Non monetary policy meeting
12.30 USD CPI data
18.00 USD FOMC Economic projections and interest rate decision

06.30 JPY BOJ Governor Karudas speech
08.30 CHF SNB Interest rate decision
10.00 EUR ECB CPI data
12.00 GBP BoE Asset purchase, Interest rate decision and Minutes

07.00 EUR German PPI data
12.30 CAD CPI data