The European Central Bank (ECB) interest rate decision and following press conference have taken centre stage this week, causing sharp movements in euro rates yesterday afternoon. The ECB left interest rates unaltered at 0.25%, which caused the euro to strengthen somewhat; however, as this result was widely predicted by key economists, its effects on euro strength were limited. More notable euro strengthening came as a result of the subsequent announcement by ECB President Mario Draghi that inflation in the Eurozone is expected to rise gradually. This lowered expectations of any further rate reductions or any additional stimulus, which would weaken the currency.
In the build-up to Thursday’s events, euro rates remained surprisingly stable as the events in Ukraine and speculation amongst investors failed to have any real impact on the performance of the single currency. The euro did weaken against sterling on Wednesday in response to strong data coming from the UK services sector. However, it then strengthened sharply against both sterling and the US dollar yesterday, reaching its highest point this year against the US dollar.
Today may see further movements in euro rates as a continued reaction to yesterday’s events. Monthly industrial production data from Germany may also have a bearing on euro performance on the whole.
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