Market Outlook ECB Press Conference Today

The last couple of days have seen somewhat of a surprise on the currency markets with the Pound managing to shrug off fears over a hung Parliament and subsequent coalition forming mess to make some gains, most notably against the Euro. The reason for this improvement is not immediately clear, and points more than anything to uncertainty and multiple factors all struggling to give us a clear picture.

In the UK the election has much of the focus, but there is still time for economic releases and yesterday saw CPI inflation come out at 0%, the lowest level since records begun. This is bad news for the Pound as it points to a delay in interest rate rises, but it was expected, probably priced in already in Sterling’s recent drop and more to the point paints a rosey picture for the “cost of living crisis” that the politicians love to grab sound bites on. A good example of how a single release can be taken in many different ways and hence provides the market with little other than question marks.

In Europe the focus today is on the ECB’s monthly policy statement and the following press conference. Many analysts expect this to be a bit of a non-event, with nothing new really expected from Mario Draghi. The only real potential interest could come in the press conference – the European economy has shown some signs of life recently and as a result there is the possibility that the ECB might look to curtail their QE program slightly. If this did come to pass, then the recent gains for the Pound could be wiped out very quickly as the Euro would get a significant boost.

For anyone with a currency requirement further afield, we have US industrial production and housing data and the Canadian monthly policy statement and report this afternoon, and overnight we had some expectations come into the market that the RBA is likely to be considering interest rate cuts, which have weighed heavily on the Aussie Dollar.

As ever stay in close contact with your CI account manager to be kept informed of exactly what is happening and what the likely effects on your upcoming currency purchase might be as a result.