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Weekly roundup: Caution from ECB policymakers keeps euro appetite soft

currency-newsWeekly roundup: Caution from ECB policymakers keeps euro appetite soft
Appetite for the euro was soft for much of last week. Comments from members of the European Central Bank (ECB) were largely gloomy, causing markets to rethink their confidence in a decision to begin tapering quantitative easing before the end of the year.

The euro started off the week on a muted footing after European Central Bank (ECB) member Benoit Coeure suggested stimulus may still be required for some time yet. Fellow Governing Council member Vitor Constancio made the markets even more jittery on Tuesday after claiming that interest rates could theoretically be lowered further if necessary.

A lack of any real positive surprises from the German and Eurozone data on Wednesday kept appeal for the euro limited. Finalised German inflation data reprinted in line with estimates, while Eurozone employment figures for the second quarter edged lower quarter-on-quarter and held steady at 1.6% year-on-year, although this was because the previous period’s growth was revised up to 1.6% as well.

Industrial production somewhat disappointed, with year-on-year production accelerating to 3.2% instead of to 3.3%.

The focus was back on comments from an ECB policymaker on Friday. Bostjan Jazbec wasn’t particularly upbeat, but markets were cheered by the fact he displayed little concern over the strength of EUR exchange rates. This suggests the ECB does not intend to intervene to weaken the euro.

Friday’s Eurozone trade data showed that the surplus had fallen further than expected, but strong wage growth data boosted hopes that inflation would rise in the currency bloc. This supported the odds of the ECB opting to taper quantitative easing before the end of the year, pushing the Euro higher.

There are some high impact developments on the Eurozone data calendar this week to keep EUR volatile. Tomorrow’s Eurozone and German economic sentiment figures from ZEW are expected to improve, giving the euro a boost.

ECB President Mario Draghi will give two speeches this week; one in Frankfurt on Thursday and one in Dublin on Friday. Thursday also sees the publication of the latest ECB Economic Bulletin, while a slew of Eurozone PMIs is scheduled for release on Friday morning.
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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