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Weekly roundup: Euro gets a boost from signs of ECB QE tapering discussion

currency-newsWeekly roundup: Euro gets a boost from signs of ECB QE tapering discussion
It was a turbulent week for the euro last week, with the economic outlook for the currency bloc shaken by mixed signals from the latest data. However, news from the latest European Central Bank (ECB) monetary policy meeting provided strong support on Thursday.

Gloom in the US benefitted the euro last week, with EUR strengthening as odds of another interest rate hike from the Federal Reserve this year faded further.

A surprise uptick in the Eurozone Sentix investor confidence index for September on Monday helped make up for weaker producer price growth during July. The measure of investor sentiment climbed from 27.7 to 28.2 instead of falling, while producer prices stagnated on the month instead of growing 0.1%.

Poor data on Tuesday undermined the euro’s gains, however. Services and composite PMIs for Italy and France disappointed forecasts, clocking in lower-than-expected, which dragged the overall Eurozone indices lower. Additionally Eurozone retail sales declined -0.3% as economists had expected. This somewhat dented the view that the Eurozone economy remains in a robust state of health.

Things improved on Wednesday, although German factory orders data revealed a -0.7% decline in July. However, the German retail PMI for August leapt from 50.7 to 53 and the Italian index edged closer to growth territory, climbing to 48. Although the French and Eurozone indices disappointed, the fact the currency bloc’s powerhouse economy is enjoying strong retail sales helped keep markets in a positive frame of mind.

The outcome of the latest European Central Bank (ECB) monetary policy meeting sent the euro higher across the board on Thursday. Although no changes were made to the stimulus package, President Mario Draghi revealed that very preliminary discussions regarding changes to the quantitative easing programme had begun. He also indicated that these talks were likely to progress much further in the October policy meeting.

German data on Friday took the wind out of the euro’s sales after showing a sharp narrowing of the trade surplus. This was because German exports grew just 0.2% in July; a much worse recovery from June’s -2.7% contraction than the 1.3% expected.

Speeches from ECB members could alter the Eurozone monetary policy outlook this week and therefore create volatility for the euro. Benoit Coeure has already spoken this morning, but Vitor Constancio will speak tomorrow, Yves Mersch on Thursday and Sabine Lautenschlaeger on Friday.
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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