The Euro has enjoyed the spotlight on what had been a relatively quiet day for currency markets, but the ramifications are very real in the near term for Euro buyers and sellers alike from the news today.
There were a couple of moments which coupled together creating a fairly mouth-watering picture for currency traders towards the Euro today – explaining the 0.6-0.7 month gain from a sudden turnaround at around midday.
Firstly European Central Bank member Peter Praet hit the headlines with a comment that the bank’s confidence in economic recovery had been bolstered by recent performance and business confidence data. He pointed to risks to growth outlook being now largely palatable – which sets the scene for the Bank to discontinue their actions and thought process from a position of anxiety. He also pointed to an easing on price pressure being noted – meaning the Eurozone’s long-term issues with inflation may finally be being relieved.
The minutes from the most recent meeting of the ECB last month combined very well with these comments. Effectively it stated that emergency stimulus would be wound down if inflation managed to improve.
Given the speech earlier that day, which suggested improvements to inflation prospects were likely, traders were able to put two and two together and immediately began buying up Euro’s. Demand soared with the prospect of the Eurozone stimulus being wound down, and this demand is why you saw inroads against the Pound.
The momentum now seems to be behind the Euro heading into the weekend so anyone with a Euro buying requirement may wish to act sooner rather than later. Conversely, anyone looking to sell Euros may wish to look for opportunities tomorrow afternoon before the close of play for the weekend.
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