The pound is still just under the 1.22 threshold with all eye on tomorrow’s ECB interest rate decision. There is a very outside chance that due to very weak inflation data recently in Europe that the ECB may have to consider some unusual policy measures to kick-start inflation and avoid the risk of deflation. Some suggested options have been negative interest rates for overnight deposits, or some form of bond buying program similar to the Quantitative Easing used in the US and the UK. Whilst I don’t expect policy to change tomorrow – let’s face it the ECB are a cautious bunch when it comes to radical change and will more likely take a wait and see approach, hoping inflation will right itself – the real key will be Mario Draghi’s press conference.
Analysts will be closely monitoring every word for hints of future policy change, so we could expect a lot of volatility on GBP EUR rates. If Mario Darghi can calm inflation concerns we could see exchange rates drop as the markets price out some of the recent pressure, but any hints towards the unusual measures just mentioned and the Euro could fall. If you do have a currency transfer to make, or need to buy or sell euros, then feel free to contact me for an overview of our services and how we can get you the best exchange rate. Email Colm at [email protected] and I would be happy to help.