- ECB Removes Easing Bias but Extends QE Measures until SEPTEMBER – Euro (EUR) Exchange Rates Suffer -
The Pound Euro (GBP/EUR) exchange rate climbed on Friday, capitalising on comments from European Central Bank (ECB) President Mario Draghi which downplayed the bank’s decision to remove its easing bias in the March statement.
The removal of said bias was initially deemed a hawkish indication from the central bank, with markets leaping at the prospect that the ECB was preparing to make good on normalising monetary policy.
Mr Draghi quickly doused these hopes in the following press conference, however, saying that the decision to expand the bank’s quantitative easing program had been put in the statement back in 2016 and that quantitative easing measures would continue until September and maybe beyond.
On top of this, the bank cut its growth forecasts for this year from 2.4% to 2.3%, news combined that left the single currency floundering.
- US President Trump Signs Tariff Proclamation – Pound (GBP) Exchange Rates Unfettered -
In other news US President Donald Trump has put his tougher trade talk into action, signing a Presidential proclamation for tariffs on steel and aluminium (though excluding Canada and Mexico, which he will seek to use the tariffs as leverage against).
This is effectively calling the Eurozone’s bluff, with the US President seemingly unperturbed by the EU’s talk of retaliation on American brands such as Harley-Davidson and Levi Strauss.
This is largely because the EU (and China) both already have sizable trade surpluses with the US, positioning them as opponents with a lot more to lose in the event of a trade war.
UK Trade Secretary Liam Fox quickly minimised the influence of this news on Sterling by assuring markets that he will negotiate to try and secure Britain an exemption from the steel tariffs - confident that he could achieve this goal because of the UK’s close security ties with Washington.
This kept the Pound buoyed somewhat, whilst the Euro took the brunt of the market concerns.
- Pound Euro (GBP/EUR) Exchange Rate Forecast: UK Spring Budget in the Spotlight -
The Pound Euro (GBP/EUR) exchange rate could see greater volatility next week depending on the result of the highly anticipated UK Spring Budget, with Chancellor Phillip Hammond expected to provide an economic update.
If Hammond’s sentiment proves gloomy then Sterling could come under pressure.
A surprise announcement for substantial spending in 2018 could extend the Pound Euro’s rally, however.