The Euro weakened yesterday allowing those buying Euros a short reprieve. This unexpected tumble followed comments by Ignazio Visco, Governor of the Bank of Italy and a member of the ECB’s Governing Council.
Mr Visco stated that Eurozone monetary stimulus policies should remain expansive. Essentially these dovish comments are an indication that the ECB intends to keep interest rates at low levels, and the rate of asset purchases high in the short-term.
Analysts do not expect the ECB to raise interest rates or adjust stimulus measures until the target inflation rate of 2% is close.
If sentiment from the ECB continues in this dovish fashion the result is likely to be further Euro weakness. With markets currently pouncing on every scrap of news, it is near to impossible to predict which way the GBP/EUR rates will go.
Although the markets have turned their attention more towards economic data and the likelihood of interest rate hikes, news about Brexit can drop at any time, hitting the exchange rate, causing movement either way.
With little UK or EU data expected for the end of the week and Bastille Day on Friday in France, there are only a few EUR related releases that could impact rates, the most notable of these being Eurozone Trade Balance figures which are due at 11:00am BST on Friday. These numbers are expected to show an increase to €20.3B, so a significant difference could cause some movement. The other minor announcements are Italian Trade Balance numbers and CPI data, neither are expected to cause significant volatility.
As discussed, there is little data of note due for the Euro until next week. However, this is not the case for the US Dollar. Janet Yellen, Chairlady of the US FED is still testifying to Congress today, explaining the current US economic situation. Following this, tomorrow we have a raft of data due for the US. The most notable of these are month-on-month Retail Sales of June, due at 1:30pm BST. This is expected to be positive. Released at the same time there are some year-on-year Consumer Price Index (CPI) releases, also for June. With expectations of 1.7% year-on-year expect any deviations from this figure to result in currency fluctuations.
It’s worth keeping an eye on these as any deviation from the expected could affect the EUR/USD rate.
Following these is Industrial Production data which is expected to be positive.