Euro continues strength despite downbeat ECB

As we move towards the back end of the month, much of the key data announcements have already passed and so most sterling markets are relatively stable within recent ranges. With no releases for the UK yesterday the pound lost ground against all major currencies, with the negative trend and sentiment driving exchange rate movements. Small gains were however seen against the Aussie and Kiwi Dollar that remain very weak for the time being. After seeing a 1 month high yesterday morning, GBP/EUR has since dropped 2.5 cents in just 24hrs, again underlining the willingness to sell at higher prices, and the importance of using tools such as LIMIT orders to take advantage of any brief spikes that often occur before UK markets are open.

The Euro was subject to a number of PMI releases in morning trading that all fell slightly short of expectations, although did nothing to halt the recent strength in the Euro. This sentiment was further enforced in the afternoon session as Mario Draghi delivered a speech at the ECON hearing. During this speech the ECB president highlighted a number of challenges that the Euro-zone has faced in recent months, mentioning the liked of the Greece crises and even the current refugee situation. On an economic front he was rather downbeat in regards to the affects that recent events have had on the Euro-zone. The ECB expect a slower economic recovery as well as a slower pace of inflation returning to the 2% target. These factors are giving renewed downside risk to the growth outlook and they maintain that the ECB is fully prepared to make further adjustments to the current asset purchase programme if these downside risks weaken the medium term forecasts.

All of this would seem pretty negative for the Euro, although the currency actually spiked following the speech, with current sentiment driving rate movements as much of this information was already known and expected by the markets. Today is another quiet one for the UK with just mortgage approvals releases at 9:30am, with main highlights being Targeted LTRO for the Euro-zone at 10:15am and Durable Goods orders for the US this afternoon at 1:30pm.