The latest EU Consumer Price Index (CPI) report beat market expectations earlier today by 0.1%. Although this helped the Euro spike very briefly, it has has little affect on the GBP/EUR rate which is still above 1.14. Personally, I think that the markets have priced in that the latest interest rate decision on July 20th from the ECB and subsequent monetary policy meeting minutes will now be mostly a non-event.
Currently, the European Central Bank (ECB) are buying €60bn in asset purchases per month in order to combat the low levels of inflation, which is expected to continue until the end of the year according to recent reports. It has also been stated that the ECB is in no hurry to raise interest rates. In fact, the ECB will not look at raising interest rates until the asset purchasing scheme has been completely phased out.
Reports are indicating that this won’t be until the end of the year and could keep the Euro’s price low until there is more of an indication as to when this will be.
There are rumors that the announcement as to when the asset purchasing scheme will end is likely to be either at September’s meeting or at the Jackson Hole Symposium in the United States.
I would expect the Euro to remain fairly subdued this week whilst investors wait until Thursday for some information to sink their teeth into. I would expect Mario Draghi to be fairly explicit in his meaning after his last speech in Portugal, when the markets misinterpreted his words causing the Euro to rally initially and the drop afterwards. Although, I have found in the past that the markets can be fairly volatile whilst he delivers his speech.