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The ECB plan bolsters the Euro

The Euro has soared to a two-month high against the US Dollar, a one-month high against the British Pound and a four week gain against the Japanese Yen as the ECB’s bond buying plan boosts market confidence.

The impressive rises come after yesterday’s announcement by the European Central Bank for its new bond buying strategy to save the single currency. The bold strategy has already created positives from the markets after Spanish and Italian ten-year bonds fell below the 6% mark indicating that the two embattled country’s will receive some breathing space. Spanish 10 year bond yields fell to 5.77%, below 6% for the first time since May, while yields on the equivalent Italian bonds fell to 5.19%.

“There’s increased positivity in Europe,” said Paul Robson, a senior currency strategist at the Royal Bank of Scotland in London. If payrolls are “a good number, the market will reduce its expectation of QE and we get a more positive dollar,” he said, referring to the Federal Reserve’s bond purchases known as quantitative easing.

The Euro has also been bolstered by better than expected export figures from the regions powerhouse economy, Germany. Exports increased 0.5pc from June, when they fell by 1.4pc. Although the debt crisis has dented demand for German goods in Europe, companies have compensated for that by selling to faster-growing emerging markets.

Referring to the ECB’s plan, Alessandro Giansanti, a strategist at ING, said: “It’s driving confidence through the market. You see the rally extending to longer bond maturities, whereas in previous times the rally was concentrated on the short end.”

There is still a long way to go if the Euro is to survive but the ECB’s plans are the first step to the regions road to recovery that is, if the Germans don’t scupper Draghi’s plans.

The Pound to Euro exchange rate is currently trading at 1.2599

The Pound to US Dollar exchange rate is currently trading at 1.5972

The Pound to Australian Dollar exchange rate is currently trading at 1.5458

The Euro to US Dollar exchange rate is currently trading at 1.2672

The Euro to Pound exchange rate is currently trading at 0.7936

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