Focus on Central Banks

28 June, 2017

Matthew Boyle

Yesterday was a busy day on the market as we saw announcements from the big 3 major central banks – the European Central Bank, the Bank of England, and the US Federal Reserve. It was ECB President Mario Draghi up first who is typically good at talking up the Euro, and true to form he did not disappoint. He mentioned a “strengthening and broadening “ recovery in the Eurozone, and suggested it was inconsistent inflation preventing the unwinding the Q.E programme, but was hawkish in suggesting there would be a “considerable” as opposed to a previous “very substantial” degree of stimulus.

This was all it took to push strength to the single currency as it began to gain quickly. Bank of England Governor Mark Carneys speech thereafter was, in fact, a financial stability report and far less bullish, addressing concerns over bad loans in the UK but not giving anything with which the pound could mount a defence. By the end of the day, the Euro had gained almost a cent against the Pound taking it to the lowest it has been in 9 months. Against the USD the Euro gained over 1 and a half cents throughout the day, breaking a significant level of resistance, which has been set over the last 6 months.

In the early evening, the focus shifted across the pond to the US where Janet Yellen the head of the US federal reserve spoke. She gave a relatively upbeat speech suggesting a brighter outlook for the US economy, and suggesting that there would be “no new financial crisis in our lifetimes”. However, this did little to help the currently struggling Dollar particularly against the very strong Euro. It saw no real movement against the Pound, and by the open of business, this morning had lost even further ground against the single currency moving 2 cents in only the last 24 hours.

Today is a quiet day in the way of regular eco stats, with UK house price data in the morning and Italian inflation in the afternoon offering the highlights. However, we have further speeches from Carney and Draghi this afternoon, alongside the Bank of Japan Governor Kuroda, so we are likely in for another turbulent day.

Today we also have the Queens speech debated in the Commons, and whilst the vote doesn’t occur until next week this is a big event for the Pound as a vote up may well see some Pound strengthen, whilst a vote down could be catastrophic and potentially lead to Theresa Mays resignation and yet another general election. In what is a particularly volatile time, get in touch with your Currency Index broker today for some friendly and professional guidance on how to get the most out of your transfer when sending money overseas.