Will The ECB Act Tomorrow And Does This Mean The Euro Will Drop Further? (Colm Gilhooly)

GBPCHF Exchange Rates Reach Highest Levels Since Mid-March

The Euro has been under a huge amount of pressure of late as economic data continues to disappoint.  Indeed inflation figures the other day were once again on the low side and this has been one of the main concerns for the ECB as there is a risk that the low levels could turn negative and become a deflationary problem where prices keep dropping.  This has resulted in the ECB cutting their interest rate to a record low of 0.05% and indicate that they would be prepared to embark on some form of asset purchase program much like the Bank of England and Federal Reserve did with their respective Quantitative Easing programs.

 
All of this has caused investors to move away from the single currency hence it’s drop in value over the last few months.  The next ECB announcement is tomorrow and if they do announce the commencement of asset purchases on any scale we could see the Euro plunge further, although markets have already been part-pricing in this possibility.  This is why despite the UK losing its AAA credit rating from Moodys, and seeing Manufacturing PMI drop, the pound is still looking very good versus the Euro.

There is a risk though that if the ECB take no action and adopt a wait and see stance (maybe the recent interest rate cuts and drop in the value of the Euro could stimulate exports and growth), then the Euro could actually gain some ground.  The press conference will be all important so anyone buying or selling euros should be well prepared to move quickly.  If you would like help with a currency transfer and how to get the best exchange rate, then feel free to email Colm at cmg@currencies.co.uk and I would be happy to explain how our services work.