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EUR may slide following Cœuré speech, SARB to leave rates unchanged

business-articlesEUR may slide following Cœuré speech, SARB to leave rates unchanged
  • Cœuré speech to possibly weaken EUR
  • SARB likely to leave monetary policy untouched
  • Australian consumer confidence forecast to slide
Cœuré speech may undermine euro

Prominent European Central Bank (ECB) policy maker Benoît Cœuré is set to speak in Frankfurt later today and investors will be watching closely for any indication on how the bank’s monetary policy will play out this year.

The speech follows yesterday’s remarks by ECB Vice-president, Vítor Constâncio where he warned about speculative forces overheating the euro.

There has been considerable speculation in recent days that the ECB may be looking to speed up the process of reducing its stimulus programme in the coming months, given the Eurozone’s solid performance in 2017.

Earlier in the week ECB sources suggested this speculation may be jumping the gun, but markets will be eager for an official response to these rumours from Cœuré today. Any suggestion that investors will have to wait a little longer is likely to weaken the euro.

SARB expected to leave rates on hold

The South African Reserve Bank (SARB) is set to meet later this afternoon to hold its first monetary policy meeting of the year.

Economists forecast the bank is likely to leave interest rates on hold at 6.75%, with policymakers unlikely to want to make any alterations ahead of a crucial sovereign rate announcement by Moody’s next month.

This is likely to come as a relief to markets as some investors fear that South Africa’s lacklustre economic performance in the second half of 2017 could prompt a rate cut at the start of this year.

However, the South African Rand may still tumble if the bank remains dovish in its outlook for 2018, with any hint that it may loosen its monetary policy likely to prompt ZAR to plummet.

Robust business PMI likely to strengthen NZD

The New Zealand dollar may firm during the Asian session later as the country publishes its latest business PMI.

Economists forecast the December index - which measures domestic manufacturing activity - is likely to have held close to the three-month high struck in November.

This would see New Zealand’s manufacturing sector enjoy its 61st consecutive month of expansion and would likely be supported by another strong uptick in the employment and production indices.

Despite this, the index could easily fall below targets given the recent decline in new orders, something that would likely see the New Zealand Dollar stumble.

Upcoming data

Thursday, 18 January, 2018
13:00                     ZAR SARB Rate Decision
14:30                     EUR Cœuré Speech
21:30                     NZD Business PMI
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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