By Simon Eastman
Thursday’s trading session was all about the European Central Bank and their latest monetary policy meeting at lunchtime.
With recent gains made by the single currency, traders eagerly awaited the meeting to see what action would be taken, if any, and what words would be said, to give an insight into what the ECB might do going forward. Until the last meeting, no one had expected interest rate rises to be on the table, but as seen, slight comments hinting at such a move sent the euro into a sharp rally against both sterling and the greenback last month. The situation in the Ukraine has since put a halt to that, bar a recent recovery at the beginning of the week, following some perceived positivity from the Russian/Ukraine talks, which have since failed to gain traction.
As the results of the meeting were released, we saw a sharp uptick for the euro, gaining a cent against the pound as the ECB confirmed they would be bringing their asset purchase program to a halt by the third quarter of this year. Interest rates were left unchanged, which was widely expected, also stating if inflation didn’t start to move towards their two percent target, they may look to increase and extend the asset purchase program.
The single currencies gains were short lived though, as tensions increased over the Russia/Ukraine situation and US inflation figures released after lunch, showed as expected, another increase in their inflation from 7.5 percent to 7.9 percent, their highest reading in 40 years. Despite jobless claims in the States increasing more than expected, we still saw the greenback make back losses against the euro and make further gains against sterling, pushing ever lower resistance floors as investors take flight back to safe-haven assets, as the tension in Eastern Europe carries on, as the crisis entered its third week.
As the trading week ends, we have a few key releases to work with, starting with UK GDP released early doors, alongside UK industrial and manufacturing production figures plus trade balance. Over in Germany at the same time, they release their main CPI inflation reading. After lunch Canada release their employment data with unemployment figures and average earnings, plus net change in employment. Finally, to round of the week, the US Michigan consumer sentiment index drops at 3pm, which gives an indication as to consumer appetite to spend money with a high reading seen as positive and a lower reading, as negative for the dollar.
With so much uncertainty around and rates making sizeable swings on a near daily basis, its more important than ever to keep in close contact with your broker. If you don’t have one or want a second opinion, and have a currency requirement to action in the coming days or weeks, give one of our consultants a call today for some friendly guidance.