The Euro is likely to see considerable market volatility tomorrow after the European Central Bank meet tomorrow to discuss the future course of monetary policy in the Eurozone. Although no change in interest rates is expected there is likely to be a sizeable market reaction for Euro exchange rates when ECB President Mario Draghi takes his press conference. Sometimes there is a bigger market reaction on the back of his comments rather than the meeting announcement itself.
Clients looking to buy Euros could see a positive movement on any further tapering of the Quantitative Easing programme or on any suggestion that interest rates could rise sooner than expected although it may still be a little too soon to see such an offering. EU GDP arrived as expected at a healthy 2.7% which will be welcome news for the ECB tomorrow and could help direct policy going forward.
Those clients looking to buy Euros with pounds are likely to see continued volatility on the back of ongoing Brexit negotiations. Chancellor Philip Hammond spoke today and signalled there should be a way to include services in a future trade deal. The reception from the EU to the British governments approach however has been less accommodating so far. The French economy minister is taking a tough line on this issue and has signalled that there is little chance of a free trade agreement that includes financial services.
The lack of progress on this issue is of major concern to the British economy and hence the pound considering that the UK services sector comprises almost 80% of the economy. Due to its reliance on services any drop in output could have negative consequences for the UK. Until real clarity is offered the pound is likely to remain on the back foot.
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