Quantitative Easing from the ECB highlighting this week
20 January, 2015
This week is a relatively quiet one on the currency markets, with only a couple of critical releases due out. This is probably a good thing, as the markets are really still trying to digest the fallout from last week’s Swiss National Bank decision to remove the CHFEUR cap. The result as we all now know is a very strong Swiss Franc and a very weak Euro, which has given us multi-year highs for all of you Euro buyers.
The critical data releases we have this week are both from other central banks and come in the form of tomorrow’s Bank of England minutes release and on Thursday from the ECB with their six weekly policy announcement. The BoE minutes are not particularly likely to cause a storm, but still come under the heading of critical data, because any change at all in the voting stance towards interest rate hikes, will almost certainly dramatically move the Pound. Current expectations are for much later this year or even next for UK interest rate rises, but some recent comments have suggested it might not be that far off despite inflation dropping so low – so watch this space.
The ECB are much more likely to do something, with the markets expecting Quantitative Easing to be introduced very soon. Analysts expect a slightly different approach to QE from the ECB, as a result of the make-up of the Eurozone, which will allow not only the ECB themselves but also member state central banks to be involved too. The chances of this action happening this month are heavily priced into the Euro’s current weakness, on top of the SNB move, and seemingly rightly so, following President Hollande’s slight faux part yesterday when he talked of ECB QE quite openly, before backtracking to the “hypothesis of QE”. As mentioned, it is heavily priced in that QE is due, so a sudden Euro drop is not necessarily expected, and in fact in these situations once the reality hits, sometimes quite the opposite happens, as profit is taken by those traders who have taken their positions on the rumours ahead of the facts.
There are some less important releases due this week too, most notably today the German ZEW economic sentiment survey. This is expected to show quite an improvement, so watch this closely too because a failure to achieve could give a spike in Euro buying prices.
Make sure you stay in close contact with your CI account manager in the coming days to be kept informed of exactly what is happening, and why not ask about a forward contract – with rates so close to the multi year highs for buying Euros and with possible shifts in the coming days, locking your rate in now could be a very shrewd move.
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