Super Mario Boosts The Euro

The pound opened on Thursday at the same levels we reached on Wednesday, just under various resistance points against the major currencies. Investors did little through the morning despite a range of data releases which included Halifax house price index for the UK which posted levels much better than predicted (2.4% increase compared to 0.7% MoM) and German factory orders which was expected to be 7.5% YoY but came out at 8.4%, which did give the euro a little boost.

 

Markets were awaiting the interest rate decisions from the Bank of England and the European Central Bank which were due at 12pm and 12.45pm respectively. First came the BoE which gave nothing away, resisting any statement and held rates and asset purchase at current levels. This did trigger a slight decline for the pound as investor focus moved towards the euro and the ECB.

 

Expectations for a rate cut have been circling for a while which is the reason the euro has been under pressure lately as these rumours were priced in. When it came to the announcement, no change was given which immediately gave the euro momentum as it rallied against the pound and more significantly the US dollar. When the press conference commenced the momentum grew as Draghi proceeded to state that rates would remain low or lower in the future but they were not concerned by inflationary issues. The euro proceeded to gain 1 cent against the pound and 1 ½ cents against the dollar. For those looking to transfer money to spain for example, purchasing €200,000 would have been £1400 cheaper in the morning than after lunch – a significant difference.

 

The US data releases in the afternoon were a mixed bag, some exceeding expectations, others coming well under but with the dollar broadly under pressure the pound continued to make gains back up towards 4 year highs. So if you are looking to transfer money into dollars for business or for that property in the Florida sun, there is no time like the present to take advantage of the exceptional trading levels. Should the Ukrainian crisis elevate further, investors could become risk averse and the USD is always a beneficiary of that so these levels may not be about for long.

 

Another talking point is the Australian dollar, which following their trade balance figure overnight on Wednesday posted 1433M compared to the forecast 270M and retail sales of 1.2% above forecast of 0.5%, making sending money to Australia 1.5 cent more expensive.

 

To finish the week the key releases come in the form of UK consumer inflation expectations at 9.30am and US non-farm payrolls and unemployment data at 1.30pm. We often see very volatile trading around non-farms so stay in touch with your CI broker to ensure you don’t get caught out.