ECB meeting to shake up the market

10 March, 2016

Ashley Finill

Today the ECB will make public their quantitative easing programme plan. This could be a big market mover today. As it stands it’s 50/50 as to whether they will or won’t extend the time or increase the size of the programme. Whatever happens, you can expect that this will wake up the market and see high volatility throughout the day once this announcement is made. The deposit rate is fully expected to be cut by at least 0.1% and has likely already been priced into the market as we have seen an unexpected push from sterling on the Euro in the last couple of weeks.

Today could see a turning point for the already frail Pound, so all eyes today will be on the ECB, with Sterling still fragile following the London Mayor Boris Johnson’s support for the Brexit and the EU referendum on the horizon it could be a bleak few months for the Pound should the ECB keep on track with the current QE plan as we could soon be back down to the low rates seen in Jan/Feb.

Yesterday the UK posted industrial production figures which came in lower than expected which hindered the pound making further gains and throughout the day the pound continued to lose ground on its competitors. It wasn’t helped in the afternoon either, as the GDP Estimate was released by the National Institute of Economic and Social Research and posted an negative figure of 0.3% from the expected 0.4%.

Over in Canada Stephen Poloz announced yesterday afternoon that Canada’s interest rate will be sticking at 0.5% and in doing so the Loonie gained over 2 cents on the Pound. New Zealand also held an interest rate decision meeting yesterday evening, announcing that their rates will fall from 2.5% to 2.25%. Sterling rallied on the decision and gained 3 cents on the NZ dollar. The cut was expected but was evidently not priced into the market as when the rate cut was made public the Pound rocketed benefiting from the NZ dollars downfall.

With a busy day ahead make sure to stay ahead of the markets and speak to your account manger today.