Volatility Follows ECB Announcements

There were big swings in the value of GBPEUR yesterday after the latest round of liquidity plans were announced by the ECB.

Throughout yesterday afternoon we saw GBP fluctuate over 2.5%, after a number of changes were made to the ECB’s liquidity plans moving forward.

Changes of note consist of the deposit rate being cut to -0.4%, meaning European banks will be charged to hold money in their accounts.

The refinancing rate has also dropped from 0.05% to 0%, and perhaps the biggest shock of the day was the decision to increase QE again, whereby the ECB announced plans to purchase an additional 20 billion Euros worth of bonds each month, and that now includes corporate bonds also.

At first we saw the Euro fall steeply but during Mario Draghi’s conference afterwards,  when he said that further cuts will not be needed, we saw a surge in the value of the Euro making timing the conversion of Sterling to Euro trades difficult yesterday.

Today we can expect a quieter day for markets as there’s little economic news releases within the Eurozone and the UK, which could make for a less stressful time when converting currency as GBPEUR continues trades within the mid-zone of its current 1.26 – 1.30 trading range.