Euro Rally Continues

15 December, 2015

Simon Eastman

As the week started with a lack of any major data releases it was left to investor sentiment to influence trading on Monday.

True to recent form, this fell with the euro as markets continued rally behind the single currency which had lost a great deal of value in the past month as investors expected significant interference from the ECB at the December policy meeting, which of course did not happen. Since then, the euro has clawed back nearly 6 cents against the pound and 5 cents against the US dollar.

With literally nothing of interest data release wise the markets waited for the only thing of interest – a speech by the man of the moment, Mario Draghi at 11am. Investors took his comments well and as a positive for the euro, as Mario insisted the ECB is ready and willing to do whatever it takes to aid economic recovery in the Euro zone, trying to appease the deflated investor community after Thursday’s non-event. After making the point the ECB could still act to help stimulate growth if needs be, he also commented that monetary policy isn’t the only factor involved in economic growth, placing politicians in the headlights too stating structural reforms and reduction of red tape to aid businesses in their economic recovery was also key.

With sterling still out of favour and focus firmly looking ahead to the Federal Reserve policy meeting on Wednesday, the US dollar despite losing out to the single currency, did manage to take over a cent off the pound. Down under overnight we had the Reserve Bank of Australia minutes released giving an insight into their recent decision to hold interest rates at 2 percent. We saw the Aussie weaken by a cent as the minutes indicated the RBA were happy with the economies performance presently but held the door open for further monetary easing.

Elsewhere, the recent rollercoaster ride of the South African Rand continued. Having weakened on Friday by over 4 percent, following on from days of continued slides, as the finance minister was fired by President Zuma, it came all the way back the other way again, strengthening 5 percent as news broke he had been reinstated a finance minister, the third in 5 days! Crazy politics and crazy exchange rates for those looking to move money to South Africa, so if you have a Rand requirement, make sure you give one of the Currency Index team a call today.

Today we have some key releases so it should be a little more data led for trading today. UK inflation figures come first, followed by German and EU ZEW economic sentiment, plus EU employment figures all at 10am. The Bank of England hold their quarterly inflation report at midday, with US inflation coming after lunch – a key release and a big speculative indicator as to what the Fed may do tomorrow night. Finally, at 4.45pm Bank of Canada governor Poloz makes a key note speech so we could see some volatility for the Loonie later too. With that all in mind and a currency transfer to make, now would be a good time to give one of the team a call for some friendly market guidance.