Super Mario strikes again

4 July, 2014

Simon Eastman

Yesterday was a real data heavy trading day with plenty for the markets to go off, added to by the fact today is Independence Day across the pond and the US markets are closed, so the key data normally released on Friday was moved forward.

The day kicked off early with varied European countries releasing their Markit Services figures for June, which threw up a mixed bag with some exceeding, some missing and some hitting expectations. The UK missed its forecast 58.3 level with a 57.7 reading, although we still have the highest reading compared to all of Europe. Retail sales for the EU also missed expectations showing no growth MoM and only 0.7 percent growth YoY down from 1.8 percent last month.

So with things looking poor in the Eurozone but the UK missing its mark, the rates traded within a fairly small trading range for most of the morning until we had the monetary policy results from the ECB just after lunch. Having cut interest rates last month to 0.15 percent and the overnight deposit rate to a negative rate, the markets were keen to see if any further action would be taken. Safe to say, there was no further change but the markets did react once the press conference started.

Mario Draghi announced some big changes to how the meetings would be presented going forward, with meetings happening every 6 weeks from January 2015 with the release of meeting minutes too. He then proceeded to say the ECB would continue to use unconventional measures should EU inflation stay low for a long time and that asset purchase was still on the cards and preparations for implementation were intensifying. It was noticed though that he didnt attempt to talk the Euro down as in previous sessions, with just a brief mention that the strength of the euro “is a problem”. Despite not trying to talk it down, the euro lost ground across the board, losing half a cent to the pound and US dollar.

Sterling has been doing well of late across all major pairings, with the recent talk of raising interest rates and months of positive data releases. It’s a fantastic time for anyone looking to make that purchase overseas whether it be a property, a boat, or stock for your company so make sure to take advantage whilst the going is good. You can forward buy currency up to a year in advance so well worth speaking to one of the team about your requirements for the future to make the most of your pound.

Two more exotic currencies which the pound has made great gains against is the Thai Baht and the South African Rand. The Baht has weakened by a staggering 22 percent over the past year while the Rand has lost 7 percent in the last 6 weeks, due to a downgrading and various labour strikes hurting industry. So if you have transfers to either of these countries coming up, it’s a fantastic time to trade!

Today we just have German factory orders and UK Halifax house price index so not much to go on, whilst across the pond the markets are closed.

mario draghi european central bank