The Euro to Pound Sterling Exchange Rate was trading at 0.8567 as of 14:52 pm GMT
As forecast by economists the European Central Bank held its benchmark interest rate at the record low of 0.75, but the Euro has still fallen on the strength of the comments which accompanied the decision.
In recent weeks data releases have indicated that the Eurozone may return to growth either late this year or early 2014, and with pressure on the ECB to lower rates slightly alleviated the central bank chose to make no adjustments to its present interest rate policy during today’s meeting in Frankfurt, despite some industry experts fearing that the current strength of the Euro could prove detrimental to recovery.
As one Eurozone economist with Nomura International Plc asserts: ‘Markets will want to hear stronger words on the foreign-exchange front to stop the upward trend currently in place. But we doubt this will happen. Draghi is likely to reaffirm last month’s position’ – that position being that the exchange rate is not an ECB policy target.
Already this year the Euro has hit a 36-month high against the Japanese Yen and a 14-month high against the US Dollar. This could prove an issue as a stronger currency ups the price of exports and reduces import prices, dampening inflation, which may result in the ECB having to negatively revise its economic projections next month.
Prior to ECB President Mario Draghi’s speech explaining the central bank’s decision the Euro posted a modest gain against the US Dollar.
One industry expert commented that ‘We expect the tone of the statement to turn more cautious on the economic outlook and more relaxed on the outlook for inflation, reflecting the recent increase in some money-market rates and the appreciation of the Euro.’
Another stated: ‘The ECB is in a difficult position. A rate cut now would probably do little to reverse the current trend of the exchange rate. Draghi will have to use verbal intervention to limit any further appreciation of the Euro without committing the ECB to possible future policy action’.
And it seems that that is what Draghi has done.
During his speech Draghi referred to the exchange rate directly, saying that the Euro’s gains are upping the odds of inflation slowing. He also mentioned the continuing ‘downside’ risk to Eurozone growth.
After Draghi’s speech was transmitted the Euro drooped against all but two of its most traded rivals, shedding 0.6 per cent against the US Dollar and 0.7 per cent against the Japanese Yen.
The British Pound was also able to gain on the common currency as future BoE Governor Mark Carney lessened the odds of the British central bank instigating additional stimulus.
As the markets reacted to the latest developments chief currency strangest Simon Derrick was quoted as saying: ‘The Euro’s decline tells you how sensitive the market is to the whole issue of unwarranted currency strength and anything that might suggest there could be a more activist view [from the ECB]’. However Derrick did add, ‘The total impact of what [Draghi] had to say about the Euro will be limited.’
Current Euro Exchange Rates
As of 14:52 pm
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8567
The Euro to US Dollar exchange rate is currently trading in the region of 1.3468
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.3023
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.6190
The Euro to Canadian Dollar exchange rate is currently trading in the region of 1.3488
The Euro to Emirati Dirham exchange rate is currently trading in the region of 4.9430
The Euro to Swiss Franc is currently trading in the region of 1.2314
The Euro to Japanese Yen exchange rate is currently trading in the region of 125.8580
Comments are closed.