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EUR: euro hits a three-week low following ECB announcement

By Michael Cooper October 27th, 2017

The euro had a bad day at the office yesterday as it weakened against sterling and the US dollar. This came despite some startling retail sales figures from the UK and really does go to show what an influence monetary policy can exert on currency markets. For, while the ECB’s decision to keep interest rates on hold was expected, traders were clearly disappointed at the quantitative easing programme decision.

Although the central bank are currently committed to purchasing €60 billion of new bonds each month until the end of December, from January 2018 they will halve this commitment to €30 billion. In addition, they announced that this programme would run until at least the end of September. There was a view that the ultra-loose fiscal policy didn’t have to run quite so long.

Somewhat surprisingly, ECB President Mario Draghi confirmed that the decision was not unanimous, although he added that there was ‘broad consensus on several issues, and a large majority on other issues’. He also stated that the US economic recovery is ‘way more advanced’ than in the eurozone, which could be brought into question. I don’t mean to suggest that’s wrong, but the conviction behind the statement is certainly up for debate.

Looking ahead to the rest of today, there are no major releases, although we do have Spanish retail sales figures. It will be interesting to see what, if any, influence the recent tensions between Spain and Catalonia have had. Finally, we’ll see the German import prices which are expected to increase slightly.