The European Central Bank are set to release their latest interest rate decision Thursday at 12:45. With interest rates are rock bottom (0%) the consensus is for no change. However when President Mario Draghi addresses the public shortly after this is when I expect to see a volatile period for euro exchange rates.
Many economists are predicting that Mr Draghi will extend the Quantitative Easing program which finishes in March by the end of year. If Draghi makes any hints to an extension we could see an afternoon session of euro weakness. It’s key to note recently Mr Draghi has remained bullish within his press conferences therefore this press conference could go either way.
The pound had a positive day against the euro yesterday off the back of positive Consumer Price Index (inflation) numbers and limited coverage of Brexit news. Looking ahead for GBPEUR exchange rates, the likelihood of the pound strengthing against the euro is minimal. For buying euro exchange rates to improve the ECB will have to devalue the euro by extending the Q.E program.
Personally I don’t think an extension will come until December and if the pound continues to devalue up until the end of the year I don’t see the euro weakness making back the losses and then some, therefore if I were buying euros my strategy would be sooner rather than later.
Many clients do not realise that they can lock into exchange rates now and pay later if they do not have all of their sterling available. This is known as a forward contract!
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