ECB cuts rates – GBP steals short gains whilst USD benefits most

6 June, 2014

Matthew Boyle

In what was a fairly quiet week on the market in terms of data prior to yesterday, all eyes were strongly fixed on the ECB announcement which saw them introduce a raft of measures aimed at stimulating the Eurozone economy. The major announcements were firstly that there would be a cut to the benchmark interest rate to 0.15% down from 0.25%, but perhaps more interestingly a cut in the deposit rate from banks from 0 to -0.1%. This is an attempt to try and encourage banks to lend to small businesses, however take note it is the first bank to ever introduce negative interest rates. Whilst many economists predicted this and some argue it is perhaps too late, many feel the effect of these negative rates are somewhat unknown, and even Draghi himself added in the speech that there is “considerable uncertainty how effective negative rates will be”. This sentiment was in part echoed in the market as we saw during the speech a near cent rise in GBP>EUR rates, which was however quickly eroded taking the pair almost to where they had started by the end of the days trading.

Certainly as many have suggested it will be a fairly long road before the impact of these changes whether overall positive or negative will be felt, and with that in mind those of you with upcoming Euro transfers to make would be well advised to stay in close contact with your CI broker.

Across the pond whilst currently the USD remains weak against the pound, it is benefiting from the weak Euro- clawing back a couple of cents over the last 2 weeks trading. Indeed whilst it is not far off from the 5 year low against the pound it is making ground against the Euro, which is an interesting mix within the majors. So it would seem at present (and many would say long may it last) that the pound is the strongest pick, with the Euro weakest. Whilst the pound is currently enjoying fantastic buying levels against both, the Euro and USD are suffering. And whilst it seems there is ongoing talk about further amendments to their Q.E programmes by the FED and ECB currently the outlook for the pound is a good one.

Take note however- as we know and have seen the currency market is a constantly changing landscape, and investor sentiment can easily shift. So if any of you reading this have an upcoming currency requirement speak to your Currency Index broker today who can not only advise you on the various ways in which you can order your currency, but can watch rates, and provide you with the relevant information so that you can make the best decision in order to get the most for your money.

Currency Index can help you stay well informed and well ahead of the market.