Foreign exchange investors were promised a volatile FX trading week and after a flat start they eventually saw some extensive movement for the Euro (EUR) in relation to the Pound Sterling (GBP) and the US Dollar (USD)
Foreign exchange rate markets witnessed the Euro correct sharply against both the British Pound and the US Dollar exchange rates on Thursday, after the ECB made a softer-than-forecast move to boost the Eurozone economy by cutting the key interest rate and by extending its QE programme.
The overnight deposit rate was cut to -0.3% from -0.2% to encourage the banks to lend rather than hold deposits within the European central bank.
The ECB also extended its quantitative easing measures by 60 billion Euros over six months to March 2017, bet left its main interest rate on hold at 0.5 per cent.
Latest Pound / Euro / Dollar Exchange Rates Today
On Sunday the Euro to British Pound exchange rate (EUR/GBP) converts at 0.846
The pound conversion rate (against euro) is quoted at 1.181 EUR/GBP.
Today finds the pound to canadian dollar spot exchange rate priced at 1.729.
The GBP to AUD exchange rate converts at 1.934 today.
The live inter-bank GBP-USD spot rate is quoted as 1.264 today.
NB: the forex rates mentioned above, revised as of 28th Apr 2024, are inter-bank prices that will require a margin from your bank. Foreign exchange brokers can save up to 5% on international payments in comparison to the banks.Stock markets across Europe dropped and government bonds slumped following the announcement with the Euro gaining as markets priced in a bold move from the ECB which didn’t materialise.
The Pound to Euro exchange rate dropped sharply following the announcement as risk sentiment gripped markets, the GBP/EUR broke the psychological 1.40 level to trade down -1.52% from a daily high at 1.4184.
The Euro to US Dollar exchange rate also gained heavily, with the euro gaining 2.55% against the USD from a daily low at 1.0520 to reach a daily high at 1.0893.
ECB President Draghi Under Delivers to Provoke Negative British Pound to Euro Exchange Rate Volatility Today
"Draghi has over promised and under delivered," said Patrick O'Donnell, investment manager at Aberdeen Asset Management.
He continued;
"Everyone was expecting Draghi to be the white knight for Europe once again and he hasn't really showed up. Today's measures amount to tinkering around the edges." He added: "Markets won't be particularly impressed."
Euro to Dollar Exchange Rate Forecast: Further Movement Expected with US Jobs Data to Come
We are likely to see increased levels of volatility with the Euro heading into the Asian market trading session with the next major focus switching to the US Nonfarm payrolls figure which headlines the economic calendar tomorrow afternoon.
Analysts at BMO now see the EUR/USD exchange rate highs capped at 1.10:
"Today’s ECB announcement may have disappointed financial markets but expectations heading into this meeting were pretty high, especially considering that domestic growth is improving."
"These new measures should continue to support growth and protect the economy from headwinds from outside of the Euro Area. But the door is open to more cuts, if needed, and there is still the extra tool that
could be used, which is that of increasing the size of QE."
"Despite today’s rally in the EUR, our Stephen Gallo, Head of European FX Strategy sees “the combination of the Fed's rate hiking cycle, EUR capital outflows and a proactive ECB will keep EURUSD below $1.10, on average, for the first half of 2016."
EUR/GBP and EUR/USD Exchange Rates Correct Lower on Trader Profit Taking
Having surged significantly in response to the European Central Bank (ECB) policy decisions yesterday, the common currency edged lower on Friday morning.
The depreciation is the result of traders taking advantage of attractive selling positions following the steep Euro appreciation.
Mixed data results had minimal impact on the Euro after positive German construction output was countered by contracting Eurozone and German retail sales.
Irrespective of mixed results from domestic ecostats, the euro (EUR) exchange rates continued to edge higher versus many of its rivals today.
However, a number of analysts predict the uptrend to be short-lived with improved Federal Reserve December rate hike bets likely to weigh on demand.
After US Non-Farm Payrolls data bettered estimates, bets regarding a December Fed lift-off improved from around 70% to 79.1%.
With such a majority convinced that the Fed will hike rates, the question now is how often and by how much the US central bank will tighten policy.
Short-Term Trend for the Euro Against the American Dollar 2015/2016
According to analysts at ScotiaBank, the near-term trend forecast for the euro to US dollar conversion rate is neutral/bullish:
"EURUSD short‐term technicals: (bullish/neutral) EURUSD edged higher in Asian trade before easing back again. Price action looks consolidate for the moment but renewed gains through 1.0930 intraday may see EURUSD pick up a litlle more topside momentum."
Many exchange rate forecasts have predicted parity, but with the recent euro correction, is this still achievable?
RBC Wealth Management still see parity for the EUR to USD:
"RBC Capital Markets’ G10 currency strategist characterized the euro rally as a “one-off rerating” and believes the move will be short-lived.
"He continues to expect the EUR/USD exchange rate to reach a low around parity (1.00) in the first half of 2016.
"After all, the Fed should be in the midst of its rate hike cycle during that time and the ECB’s QE program will be ongoing.
Read the latest GBP-EUR and multi-currency news reports just published.