Euro strong as ECB hold off on stimulus

9 September, 2016

Rob Bastin

Yesterday signalled the turn in recent good fortunes for the pound, as Wednesdays’ poor manufacturing data for the UK begins to sink into the markets. The pound has now dropped 2 cents in just 2 days from its recent highs against the Euro and US Dollar, a clear signal that the latest good run has found its ceiling and the sellers and very much back in the market to continue the negative trend for the pound. The pounds losses yesterday were without any new data being released for the UK, and instead was based on technical resistance levels and a willingness for traders to sell from Wednesday’s peaks that were very much considered to be overbought. If you are still needing to buy your overseas currency then you may wish to consider moving sooner than later before the next downward arm picks up momentum.

The headline news from yesterday was from the ECB’s Monetary Policy statement at lunch time, where there had been speculation of an increased term on their bond buying scheme that current runs to March 2017. Rates were held at record lows as expected and will remain at these levels ‘well beyond’ the end of their asset purchase programme, one that is still expected by experts to be extended by another 6 months before the end of the year. The Euro initially gained on the news announcement but retracted these gains during the press conference to follow. With no damaging action from the ECB, the Euro remains in its ascendency against both the pound and US Dollar and is likely to continue in this fashion in the short term.

The day ahead sees Trade Balance figures for the UK at 9:30am along with Consumer Inflation Expectations. Neither announcements are likely to be big market movers but the pound is certainly fragile at these current highs given the ongoing negative backdrop or Brexit negotiations and Bank of England stimulus. To fix your rate at the current levels with just a 10% deposit, contact your dealer today and ask about our Forward Contracts.