Euro joins Pound in recent changes to the currency markets

Yesterday saw quite a change to the recent Pound dominated currency markets, with the Euro taking a big step back towards centre stage; gaining a cent back against Sterling and the US Dollar. This followed the monthly policy statement press conference from Mario Draghi, during which he seemed to give a clear indication that any anticipated further easing was probably not on the agenda. When asked specifically about a possible round of Quantitative Easing, he rather sceptically asked the questioning journalist “what assets the ECB should buy”, giving a clear indication he does not think this is a likely route for them to take.

This more positive stance was ceased upon by the markets and the Euro dramatically gained strength in very short order. The Euro has been very much out of favour for the last couple of months with interest rate cuts and a very negative spin from pretty much all quarters, so this news was very well received and we could see the start of a sentiment shift back in the Euro’s favour.

We have a fairly busy day of data releases today with the UK leading the way already this morning. The Halifax have posted their house price survey which was higher than expected with a 7.7% YoY increase over the three months to November. This allowed the Pound to push back up across the board, including a claw back of some of the Euro’s gains from yesterday.

Later we have Consumer Inflation Expectations in the UK and a whole raft of US data, with the highlight being Non-farm Payrolls at 13.30. It is expected that the US economy will have created 180k new jobs over the last month, and as with any NFP release expect the Dollar to react strongly if this is over or under achieved.

We are still close to year-long highs against both the Euro and the Dollar, and with a possible change in sentiment it is probably worth considering a forward contract for your upcoming currency purchase to avoid the risk of these rates dropping away.

We should have a special mention today for South Africa… As the nation hears the much expected, but never the less tragic news of the passing of Nelson ‘Madiba’ Mandela, there is also a currency interest here too. Current rates for purchasing the South African Rand are at 5 year highs. If you have a requirement to purchase Rand or would just like to take advantage of their higher interest rates for your savings, then now is almost certainly a good time to take advantage.

As ever stay in close contact with your CI account manager to be kept informed of all developments on the currency markets.