The Euro fell ever so slightly against the Pound today, as markets eagerly anticipate a key speech from the ECB (European Central Bank) President Mario Draghi who is attending the Jackson Hole Symposium.
There have been reports recently that the European Central Bank are set to unwind their Quantitative Easing (QE) programme even further – in April the ECB unwound their easing from €80bn a month to €60bn. A further reduction would signal that the Eurozone is performing well economically and as a result could potentially accommodate an interest rate hike in the future. This is likely to be seen as a positive for investors and help to strengthen the Euro further.
I’m of the opinion that Mario Draghi will steer clear of discussing monetary policy in too much detail. this is also the opinion of David Madden, market analyst at CMC Markets UK, who has been quoted as saying:
“We were told by unnamed sources from the European Central Bank (ECB) that Mr Draghi will not be laying down the groundwork for the tapering of the stimulus package.”
Although this isn’t likely to prove costly for the Euro, I think that a number of investors would have secured their position before he speaks. This slight drop off for the Euro today against the Pound came at the end of a torrid week for the GBP/EUR exchange rate as levels hit lows not seen since October 2009.
What could move Euro rates next week
The Euro is likely to start next week in the same fashion as it ended this week. German IFO data helped to top off a strong economic performance from the Eurozone’s largest economy. Elsewhere, positive business confidence reports from Italy and France next week could help to strengthen the Euro ever so slightly.
I would expect the Euro to mainly benefit from Brexit news next week. The UK’s economic data is light until Wednesday when the latest Inflation report is released, so I would expect the Pound to continue to retreat against the Euro.