Neil Davies, Head of Trading at PlutusFX, takes a look at the Euro.
The ECB today confirmed the worst kept secret of the week by announcing it will inject billions into the failing Eurozone economy. The bond purchase scheme will be set at 60 billion Euro’s per month until the end of September 2016 and at the same time keep interest rates at a fraction above zero. The funds will be used to purchase Euro denominated investment grade securities in the secondary market.
The Euro predictably bounced around during Draghi’s speech before setting a weaker path, currently at GBP/EUR 1.315 and EUR/USD 1.152
Back in the UK, the Minutes of the Bank of England meeting two weeks ago show that the two Hawks who have been persistently calling for a rate rise have had a change of heart, to give a unanimous vote of 9-0 for keeping interest rates on hold. Hawks Martin Weale and Ian McCafferty, who have been worried over rising wage inflation, said their decision was finely balanced. With inflation now at 0.5% and the CBI Industrial trends survey today dropping from a score of 5 to a 4, markets have pushed an interest rate rise well into 2016. GBP has picked up after initially moving lower against the dollar, currently sitting at GBP/USD 1.515.
