The Euro to Pound Sterling (EUR/GBP) exchange rate continued to advance after French President Francois Hollande suggested the European Central Bank (ECB) would begin a period of QE on Thursday.
Hollande stated: ‘On Thursday, the ECB will take the decision to buy sovereign debt, which will provide significant liquidity to the European economy and create a movement that is favourable to growth.’
The official ECB monetary policy announcement is expected to take place on Thursday with central bank President, Mario Draghi, speaking.
Earlier.. The Euro to Pound Sterling (EUR/GBP) exchange rate recorded gains at the start of Monday’s session ahead of Eurozone Current Account figures.
Meanwhile, Rightmove’s UK House Prices increased by 1.4% in the month of January pulling the annual figure up from 7.0% to 8.2%.
Earlier… The Euro to Pound Sterling (EUR/GBP) exchange rate had a bit of a rough week when the Swiss National Bank (SNB) announced it was freeing the Swiss Franc from its tie to the Euro (CHF/EUR).
As you can imagine, it was bad news for the Euro exchange rate. The Single Currency dropped against other majors and recorded an 11-year low against the US Dollar (EUR/USD).
The SNB sparked fears that the European Central Bank (ECB) has big plans in the works. Quantitative easing would be the most obvious development as the ECB is the only major central bank to not have undertaken a period of bond buying since the onset of the global financial crisis.
Strategist Thu Lan Nguyen stated: ‘It’s more of a negative Euro story. Obviously, they are assuming that the ECB is going to be ultra expansionary for a very long time and they don’t want to follow this monetary policy. It was a bomb they dropped there.’
A recent leak from an ECB insider suggested that several plans for QE procedures were doing the rounds amongst policymakers to gain their thoughts and approval. Problems arose when influential economists suggested that the leaked schemes were too small to give life to the flat lining Eurozone economy.
ECB executive board member Benoit Coeure has himself suggested that the bond buying would have to be large to be effective.
Coeure stated: ‘The only thing I can say is that for it to be efficient it would have to be big.’
Euro to Pound Sterling (EUR/GBP) Exchange Rate Forecast
We don’t have to wait long to find out what the central bank is planning.
The European Central Bank is announcing its monetary stimulus plans on Thursday 22nd January—an exciting day for Euro trading to be sure.
Any announcement of large-scale government bond buying could push the Euro down significantly and therefore investors can expect currency fluctuations in the run-up to Thursday.
However, before then, the Pound may be in for some increased activity when the Bank of England (BoE) releases its latest meeting minutes.
The last four meetings have seen divergence among policymakers on the topic of interest rate hikes and if that continues the Pound could be offered some support.
Earlier this month the BoE published the full transcript of historical minutes taken around the time of the start of the financial crisis.
Current BoE Governor Mark Carney said of the minutes; ‘The financial crisis was a turning point in the Bank’s history. These minutes provide further insight into the Bank’s actions during the exceptional period – the policies implemented to mitigate the crisis, the lessons that were learnt and how the Bank changed as a result.’
In addition, to Wednesday’s BoE meeting minutes, the UK’s Unemployment Rate and Employment Change figures will make an appearance and could bode well for the UK economy if favourable.
Unemployment in the UK resided at 6.0% in the three months through November while Employment Change sported a 115K figure.
Other events of influence include Tuesday’s German and Eurozone ZEW Economic Sentiment Surveys. The German ecostat resided at 34.9 in December, while the Eurozone figure rested slightly lower at 31.8.
Friday will see the release of UK Retail Sales stats and German and Eurozone Manufacturing, Services and Composite Purchasing Managers Indexes (PMI).
In addition to the Economic Sentiment Surveys, ZEW will also release its German Current Situation Report on Tuesday.
On Sunday the Euro to Pound Sterling (EUR/GBP) exchange rate was trading in the region of 0.7629
