- Draghi confirms tapering of QE
- Sterling falters on Brexit deadline
- GBPEUR trending towards 1.12
Mario Draghi last night was asked to confirm comments with regards to the European Central Bank tapering their quantitative easing measures. The ECB have been purchasing bonds at an astonishing rate of €80bn a month and that could be coming to an end.
There was previous talk that they were running out of bonds to physically buy, however this latest news suggests the Eurozone could be starting to strengthen. This in turn piled even more pressure onto Sterling causing the rate to drop just above the 1.12 level.
IMF Growth Forecast
The IMF yesterday increased the UK’s growth forecast from 1.7% to 1.8% for 2016; however they cut the forecast levels for 2017. Furthermore the International Monetary Fund cut the US forecast for next year from 2.2% down to 1.6%, this didn’t seem to have any effect on the USD as the GBP/USD rate fell to a 31 year low.
There seems to not be as much of a focus on forecasts, this may partly be down to the fact they are rarely correct and are continuously revised in response to events that have happened. In years gone by growth forecasts were gospel, however as there is so much uncertainty in the market there seems to be less reliability.
Investors Place Bets in the City
There has been reported a huge amount of bets in the billions being placed on the GBP/EUR rate being around the 1.09 mark by the time we arrive at Christmas. Whilst this is merely speculation and there is always room for surprises in the currency markets, the huge amount of positions being taken up suggests it is heavily expected.
If you need to buy Euros in the coming weeks, further Sterling weakness is likely and I would therefore consider your options this week.