Euro continues to gain amidst weak USD

4 June, 2015

Matthew Boyle

Yesterday saw the Euro continue to make gains across the board following a number of positive data releases coupled with ECB chief Mario Draghis speech which suggested that Eurozone recovery is set to “broaden” as he raised initial projections for 2015.

Whilst ECB interest rates were held at 0.05%, inflation in the Eurozone is now expected to be 0.3% this year – up from a previous prediction of 0%. This coupled with suggestions from French President Hollande that Greece may now be “hours away” from an agreement with the IMF, saw the Euro gain around 2 cents against the pound and 1.5 cents against the Dollar.

EUR gains against GBP were (as we have seen much in recent weeks) aided by a weak USD. Afternoon data releases showed marginal improvements in U.S unemployment and trade balance, but worse than expected results for their services sector and a drop in Crude oil stocks meant that the Dollar was largely the days loser – dropping 1.5 cents against the single currency and nearly a cent against the pound.

Today we have a fairly quiet day in the way of data. In the morning we have the BoE interest rate decision and asset purchase announcement (albeit no change is expected here). In the afternoon the focus shifts to the U.S for jobless claims and non-farms productivity, whilst elsewhere in the world we have the Bank of Japan Governor Kurodas speech. With no real data of note today released from Europe we are likely to see rates driven by ongoing sentiment, further news on Greece and of course the USD which is playing a huge part in GBP/EUR rates. Despite the quiet day for data do not expect that the market will behave as such!

A change in trend?

In the last week we have seen the Euro gain over 4 cents against the Pound and around the same against the Dollar – a fairly stark change to recent trends. Despite the ECB announcement of an increase to their bond scheme, positive rumours from Greece coupled with good data, has seen the Euro gain momentum in the last few days. This combined with a weak dollar could see GBP>EUR rates tumble if a resolution for Greece is agreed and will only be compounded if the Dollar remains weak. So should any of you reading this have an upcoming requirement you would be well advised to speak to your Currency Index broker today for some professional guidance on how to avoid being caught out in what is a very turbulent time in the market.