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Weekly roundup: Euro weakens after ECB leaves QE open-ended

currency-newsWeekly roundup: Euro weakens after ECB leaves QE open-ended
Some positive data kept the outlook of the Eurozone economy rosy last week, but the latest monetary policy changes were somewhat disappointing. The European Central Bank (ECB) delivered the anticipated tapering to QE, but also signalled that the programme could easily be expanded again if required.

Eurozone confidence hit a sixteen-year high at the start of the week, but the Euro wasn’t able to capitalise from this, as the markets were focussed on the European Central Bank (ECB) meeting later in the week.

Things improved for the euro on Tuesday after a strong set of Markit PMIs from France, Germany and the Eurozone. There were some spots of weakness, but the overall picture was that that currency bloc economy remained healthy. In a positive sign for inflationary pressures, it was reported that job creation had hit a ten-year high.

Further improving sentiment towards the economy were Wednesday’s Ifo business survey results. The latest data showed that the outlook from the private sector had actually improved, even though analysts had predicted a fall in confidence.

The European Central Bank (ECB) announced on Thursday it would indeed taper quantitative easing, as markets had expected. But, while the rate of asset purchases each month was slashed in half to €30 billion, the bank made it clear that this could be raised again if data suggested the economy was struggling without the additional injection of funds. This disappointed the markets and put the euro on the decline.

While German import prices beat forecasts, the euro was on poor form on Friday. A strengthening US dollar was pressuring EUR lower, as was the political situation in Catalonia. The region’s parliament voted to declare independence from Spain, heightening tensions even further.

There are enough high-impact data releases on the calendar over the coming days to keep the euro volatile even when the calendar is empty. Today’s German inflation data will show how inflation has fared during October, while tomorrow’s Eurozone finalised third-quarter consumer price index and GDP figures could unsettle markets if they deviate from earlier estimates.

After an empty day on Wednesday, Thursday offers German employment data, before a barren day Friday that promises only a speech from ECB official Benoît Cœuré.
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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