Mario Draghi causes the Euro to rise considerably in value following ECB statement
Things are not looking good for the pound. The head of the European Central Bank (ECB), Mario Draghi spoke today at the monetary policy statement which gives an indication as to monetary policy moving forward. This does have the potential to influence the markets and that is what has happened this afternoon. Draghi was hawkish during his speech and the euro strengthened as a result hitting new lows. GBP/EUR currently sits at 1.1147.
The current loose monetary policy is stimulating demand for credit, a sign that the health of the Eurozone economy is improving.Although this is justification for current monetary policy and should not be changed as of yet, if the economy shows continued improvement then we could see Quantitative Easing (QE) tapering. QE is essentially pumping money into an economy to stimulate growth. The current figure is an €80bn increment per month in the Eurozone. We have seen spurts of positive data in the Eurozone before, but it has not been sustained. Recent positive data has been much wider and more sustained both in market sector and geographically. If this continues there is the strong possibility of tapering which would no doubt cause significant euro strength.
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