The Euro (EUR) exchange rate rallied strongly against the Pound (EUR/GBP), US Dollar (EUR/USD), Canadian Dollar (EUR/CAD) and other major peers on Thursday after the European Central Bank (ECB) said that policy makers would not introduce a sovereign quantitative easing programme until next year.
The Euro increased as ECB President Mario Draghi dampened speculation that the central bank was moving closer to introducing a programme of quantitative easing.
‘The Euro is selling off because Draghi was not dovish enough for the market and short-covering followed. He suggested further stimulus would not happen before March. The market had hoped for something sooner than that,’ said a senior currency strategist from Commerzbank AG.
The ECB also chose to leave interest rates at the record low of 0.05%.
Draghi added that ‘the central bank could potentially change the size, scale and composition of its existing stimulus programs. The governing council remains unanimous that it will take further measures, if necessary.’
Against the Pound, the Euro strengthened strongly and rallied by more 1% against the US Dollar and other major peers such as the Canadian Dollar.
‘The central bank did not announce any further liquidity measures and certainly didn’t indicate any immediate intentions to implement full blown QE. It is a bit at odds with the most recent rhetoric and provides a boost to the Euro, if only a temporary one. It wouldn’t be surprising to see the ECB push the idea early next year, putting more pressure on the single currency,’ said economist Alex Edwards.
Sterling was weakened against the Euro after the Bank of England (BoE) chose to leave interest rates unchanged at the record low of 0.5%. The Canadian Dollar weakened sharply after oil prices once again weakened.
The US Dollar moved away from a four-year high despite US Jobless Claims data coming in positively.
Euro (EUR) Exchange Rate Forecast
The Euro’s gains are likely to be short-lived, as traders will undoubtedly reassess Draghi’s comments and the banks cuts to its inflation and growth forecasts.
The single currency is also likely to come under pressure from Friday’s European Gross Domestic Product (GDP) data, which after a run of poor reports out of Germany and France is likely to disappoint economists.
Also of interest will be German factory orders, which some economists are forecasting will fall drop sharply from 0.8% to -1.34%.
Euro Exchange Rates:
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.2442 ,
Euro,,British Pound,0.7914 ,
Euro,,Australian Dollar,1.4789 ,
Euro,,Canadian Dollar,1.4143 ,