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You are here: Home / Euro / Mario Draghi causes GBP/EUR drop but Sterling regains

Mario Draghi causes GBP/EUR drop but Sterling regains

October 20, 2016 by Ben Fletcher

Mario Draghi causes GBP/EUR drop but Sterling regains

Mario Draghi delivered his statement and answered questions from the press after the announcement the European Central Bank (ECB) would, as expected, hold interest rates. Draghi did provide a little inclination into the events moving forward but denied any discussions have been held with regards to the Bond Purchasing plan.

pound sterling note close upThere had previously been discussions of the ECB tapering and then increasing the Quantitative Easing (QE) measures however it appears that isn’t the case. The ECB President did mention that he would announce a roadmap in December, which makes the next meeting incredibly significant.

Considering when Mario Draghi speaks there is always a jump in the strength of Euros, I would not be surprised to see a major rise after the next meeting.

There was over a cent drop in the GBP/EUR exchange rate as the president answered questions on the current QE program. Draghi was keen to emphasise that when the program comes to an end in March its unlikely to be a sudden stop and there could be a so called “weaning off” process.

Will Sterling find some strength?

Yesterday the Chancellor, Philip Hammond suggested that the UK could come to some form of agreement with Europe on free movement that would be reciprocal with the EU. There has been much talk over the last few weeks that just because the UK voted to leave the EU, they didn’t vote to indefinitely leave the single market. Whilst most believe the two come hand in hand, Mr Hammond wants to try and form some middle ground.

This installed some confidence in the Pound which help the GBP/EUR rate moved back above 1.12 yesterday afternoon. In the near future there could also be a vote in the House of Commons which will allow MPs to have their say on the Brexit negotiation conditions, it has been no secret that this could well cause some contention as many MPs are attempting to block the UK’s withdrawal for the European Union.

Filed Under: Euro Tagged With: Article 50, Brexit, ECB, Euro strength, GBPEUR, interest rates, Mario Draghi

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