GBP/ EURO outlook improves!
Firstly, apologies for the lack of market analysis, it's been a hectic couple of weeks' to say the least!
Secondly, it's always nice to update where there's an element of positive sentiment in the market to focus on rather than the negativity and volatility which I think hinder business decisions and make trading conditions more difficult than they actually are...
The GBP/EUR outlook has improved after the latest polls surrounding the EU referendum highlighted fears of a Brexit are easing. This came in the wake of six consecutive days last week of it closing higher. When trading finished at the end of last week, the sterling to euro exchange rate was at its best price level for four weeks. The question for the coming week is whether British politics will continue to affect exchange rates or the release of domestic data will be a bigger driver.
USD/EUR drops to a three-week low
On Friday, the USD/EUR pair closed in line with estimates, but this does not tell the whole story of the week. It is now trading strongly, but news from the European Central Bank (ECB) president Mario Draghi that fresh interest rate cuts could occur on Thursday saw it drop to a three-week low. The USD/GBP pairing opened at its highest level since mid-March this morning (25 April), but has retraced to a more regular level. There are no specific triggers in today’s calendar that are likely to upset the balance of things at present.
ECB emphasise confidence with easing policy
The ECB’s press conference last week was mainly about keeping confidence in its ongoing monetary easing policy. This meant there was no fresh stimulus as a result. Policymakers in Germany have spoken out about the fact that the “monetary policy has been the only policy in the last four years to support growth”. They went on to say that it is not working – something that has been corroborated by Draghi himself when he said that inflation is likely to return to negative territory in the upcoming months. Friday’s release of the eurozone purchasing managers’ index (PMIs) for April also affected the common currency. It showed only a modest growth and a lagging manufacturing sector with the sole element of positivity coming from services output.
All eyes on the Bank of Japan
All eyes will be on the Bank of Japan (BoJ) later this week when it meets to discuss whether to further ease monetary policy and extend negative interest rate loans to banks. The monetary policy meeting will last for two days and could have a large impact on the markets. There has been a massive rally in the Greenback against the yen as speculation about the BoJ’s decision was rife. The US dollar was not the only market affected by the anticipation, however, with several others also experiencing the rippling effect. Most notable of the major currencies in this instance was the euro.
Enjoy your week.