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Could ECB announcement drag euro lower today?

business-articlesCould ECB announcement drag euro lower today?
  • Signs of ECB caution could weigh down euro

  • US dollar weakness to persist if leading index disappoints

  • Brexit speculation continues to drive pound outlook


ECB announcement to provoke euro volatility

Euro exchange rates could see further weakness today if the European Central Bank (ECB) delivers a cautious message in its first policy announcement of 2019.
If policymakers show signs of greater dovishness this could weigh heavily on demand for the single currency, pushing back the likely timing of an interest rate hike.
On the other hand, the mood towards the Euro may improve if the ECB maintains an optimistic outlook on the health of the Eurozone economy.
Focus will also fall on the latest Eurozone manufacturing and services PMIs, which could point towards a sustained loss of growth momentum in January.

US dollar vulnerable to weaker economic momentum

After a bout of weakness the US dollar is looking for support this afternoon with the release of December’s leading index.
However, forecasts point towards the index showing a modest contraction of -0.1% on the month, highlighting the increased vulnerability of the US economy.
Fresh signs of softening growth could encourage USD exchange rates to extend their recent losses further.
Even so, if trade relations between the US and China show further signs of thawing this may still offer the US dollar encouragement.

Brexit continues to dominate pound outlook

Speculation over Brexit is likely to provoke further volatility for GBP exchange rates today.
While the odds of a no-deal Brexit have diminished this week the Pound remains vulnerable to any signs that the parliamentary deadlock is unlikely to be broken in the near future.
Although there has been talk of a potential extension to the March deadline this may not offer much support for the Pound in the near term.
As long as a sense of uncertainty continues to cloud the economic outlook the upside potential of GBP exchange rates looks limited.

Upcoming Data:

Thursday, 24th January 2019
09:00 EUR Eurozone Manufacturing PMI
09:00 EUR Eurozone Services PMI
12:45 EUR European Central Bank Rate Decision
15:00 USD Leading Index

Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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