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Euro slumps as ECB prepares for significant monetary loosening

business-articlesEuro slumps as ECB prepares for significant monetary loosening
  • Dovish ECB outlook drags euro lower
  • US dollar falters on weakening consumer sentiment
  • Pound rallies as MPs push for no confidence vote
 
 ECB in focus, EUR under pressure
 
With the European Central Bank (ECB) looking set to unveil a significant stimulus package at its September policy meeting the mood towards the euro has soured.
 
The increasingly dovish outlook of ECB policymakers left the single currency under pressure as the risk of interest rate cuts increased.
 
Support for EUR exchange rates is likely to remain limited today as no change is forecast for the finalised Eurozone consumer price index.
 
Unless the data is upwardly revised the case for further ECB loosening could keep the euro on the back foot.
 
 
Decline in consumer sentiment weighs on US dollar
 
A weaker-than-expected University of Michigan consumer sentiment index helped to keep the US dollar on a soft footing on Friday.
 
This latest decline in consumer confidence suggests that ongoing trade tensions with China are having a dampening effect on the US economy.
 
If the US-China trade spat escalates further, USD exchange rates may struggle to capitalise on any increase in market risk aversion.
 
 
Pound sensitive to UK political developments
 
Talks between UK MPs could inspire further GBP movement as markets weigh up the odds of a potential no confidence vote against Boris Johnson.
 
Signs that opposition parties may band together in an attempt to avoid the UK crashing out of the EU without a deal would offer GBP exchange rates a boost.
 
On the other hand, a lack of progress towards a workable agreement may leave the pound vulnerable to fresh selling pressure.
 
As long as the odds of a no-deal Brexit scenario remain heightened the strength of GBP exchange rates is expected to remain limited.
 
 
Upcoming Data:
 
Monday, 19th August 2019
10:00 EUR Eurozone Consumer Price Index
 
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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