ECB Hint At Further Quantitative Easing

26 October, 2015

Simon Eastman

The week ended with the euro dropping in value as the ECB announced they are contemplating an addition to their current QE program, as well as a further cut to their overnight borrowing rate, which is already negative.

The overnight borrowing rate is negative to dissuade banks from placing money on deposit in a move to encourage them to lend. A further cut in this rate clearly makes depositing money with the ECB even less attractive but banks are seemingly still doing so rather than lending, and therefore encouraging and aiding growth in the Union.

These words from Mario Draghi on Thursday sent the euro into free fall, with the pound gaining three cents against it in 24 hours from Thursday afternoon to end of trade on Friday. Great news for those looking to buy in Europe as they saw the cost of €250,000 drop in cost by some £4000 as the markets priced in the eventuality of further QE.

This week is much of the same as last, with only a couple of key releases for the UK to contend with, leaving the trend open to sentiment. Its not been with the pound recently and we shouldn’t think it suddenly is after the gains the pound made last week as this was due to pricing in of the facts available. The UK data this month hast been that good hence the pressure on the pound. The gains made could correct if the data this week misses the mark.

The key events this week are highlighted below:

Monday – US new home sales, NZ trade balance

Tuesday – UK GDP, US durable goods and consumer confidence, AUD inflation figures overnight.

Wednesday – US and NZD interest rate decisions

Thursday – German unemployment data, UK consumer credit and mortgage lending, US GDP, German inflation and US new home sales

Friday – UK GfK consumer confidence survey, EU inflation, US core inflation and Canadian GDP

As the month comes to a close we have plenty of key data from the major economies around the world with the GDP the main focus for the UK.Plenty to effect the rates though so as Halloween approaches, don’t let your currency transfer become another nightmare to deal with. Speak to one of the Currency Index team today for some friendly guidance on any upcoming exchange.