The Euro was the biggest loser this week giving up almost 2% against the pound and 1.5% against the US Dollar. The majority of this move followed the European Central Bank meeting press conference with President Draghi. After initially confirming the ECB governing council did not discuss extending the QE program leading to a jump in the Euro value, he quickly undid this work by confirming that they did not discuss tapering the program either.
He has also left the door open to further easing if necessary and suggested that a rise in inflation will only happen with very substantial monetary accommodation.
The pound had already made a modest recovery against the Euro following strong inflation figures. Although Mark Carney (Governor of the Bank of England) has already suggested they are aware inflation will rise due to the value of the pound meaning they are unlikely to take action, it was enough to put the pound on a firmer footing against the Euro. On Wednesday the latest UK jobs report came in as expected showing the UK jobs market remains robust despite Brexit fears. News from the high court that parliament are likely to get a vote on triggering Article 50 reducing the possibility of ‘hard’ Brexit also helped the Pound find favour. This is likely to go to the Supreme Court next so this is certainly a factor to keep an eye on in the coming months.
The Euro fell to a 7 month low against the US Dollar. Although most of this was caused by the ECB meeting, the Dollar remained robust following the final presidential debate. Hilary Clinton has maintained a healthy lead in the polls with Donald Trump once again helping her out; this time suggesting he will not accept the election result if he loses the race. Undermining the American democratic process does not seem to be a good move with just over 2 weeks to go. With the market considering a democratic win as ‘better the devil you know’ the US dollar remains stable.
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