Continuation of QE into 2019 causes Euro weakness
Yesterday saw GBP/EUR move above 1.15. Mario Draghi, the President of the European Central Bank (ECB) spoke yesterday at the ECB monetary policy statement and he hinted that the current Quantitative Easing (QE) program could be lengthened into 2019.
QE is essentially pumping money into an economy in order to stimulate growth. The ECB are currently injecting €30bn a month into the Eurozone to combat poor inflation. It was widely expected that QE would end this year which would cause significant Euro strength, Draghi’s speech yesterday however has thrown that in to doubt and resulted in GBP/EUR moving above 1.15, GBP/EUR is now less than a cent below the highest levels of exchange in 11 months.
Over the last eleven months GBP/EUR has moved above 1.15 on several occasions, other than the last spike over 1.15 the market has quickly retracted. If you are a Euro buyer and have to move short term I would be wary of expecting further Sterling advances due to the fragility of the pound caused by Brexit. It could prove wise to take advantage of current levels.
Sterling could lose value at BOE Rate Decision
For those hoping on Sterling gains on next month’s interest rate decision be careful. The market moves on rumour as well as fact. A rate hike from the Bank of England (BOE) is already largely factored in. The danger is if it does not occur, which has been hinted by Carney. If f the hike does occur and the following speech from Carney hints at further hikes not occurring for some time we could see the pound fall in value.
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