World Economy

Euro Remains Under Pressure

Euro Remains Under Pressure Euro Remains Under Pressure

The euro remains under pressure amid mounting expectations that the ECB will launch a government bond-buying program at its meeting on Thursday, in a bid to stave off the threat of deflation in the euro area. The market is expecting ECB President Mario Draghi will announce a €550b ($636b) program.

EUR/USD traded at 1.1615 from a low of 1.1568, demand for the euro is weak and will be as all ears will be awaiting the news on Thursday. The shared currency may rally should the ECB’s stimulus fall short of the market’s forecasts which is ranging between €500-600b, Undercurrentnews reported Wednesday.

The euro continues to lose value – good news for central bankers and export-oriented companies, bad news for importers and holidaymakers. The currency’s struggles could help stimulate the German economy, but there are risks involved

Yesterday’s ZEW economic expectations index climbed to 48.4 up from 34.9 in December, this was the third consecutive month. The improved reading was driven mainly by low oil prices and continued euro weakness.

The yen declined for a third day versus the dollar as a report showed China’s economy grew faster than analysts estimated, damping demand for haven assets. The Yen weakened against most of its major pairings as the central bank considers expansion of its monetary easing. GBP/JPY traded at 180.29 from a low of 177.52.

The Australian dollar had a volatile session yesterday, jumping on stronger than expected Chinese data then falling just as quickly on a downbeat International Monetary Fund assessment. GBP/AUD traded at a high of 1.8595 from a low of 1.8340.

 UK News

Sterling continued its gains against the euro as speculation mounts on the ECB announcing a plan to buy the regions government bonds this week, this could lower the value of the shared currency. GBP/EUR touched a high of 1.3123 and traded within a very tight range with the low at 1.2998.

GBP/EUR has strengthened over the last week as the euros loses were made worse by the SNB’s unexpected decision to remove the Swiss franc cap of €1.20. GBP/EUR is just trading short of a 6 year high and the forecasts would indicate it could weaken further.

GBP/USD managed to recover from Monday’s low of $1.5055, this was supported by sterling strength. There hasn’t been any relevant fundamental data coming from the UK this week until this morning, when BOE Minutes and the monthly employment figures will be released. GBP/USD touched a high of 1.5199.

This morning will see the release of the minutes from the BoE policy meeting from 8th January. The interest rates were held at a record-low 0.5% UK borrowing costs have been at that level since March 2009. The International Monetary Fund forecast the UK economy will grow 2.7% in 2015, unchanged from its previous projection in October 2014.