At 12:45 GMT+1 Thursday the ECB held off another interest rate rise and left the current rate unchanged at 1.25%. Following the decision Jean-Claude Trichet made some slightly disheartening announcements in the press conference. The market’s reaction to Trichet’s less than hawkish comments was instantly seen as the Euro lost ground against the 16 most actively traded currencies.
The Euro retreated from 1.1062 over the course of the afternoon and allowed Sterling to capitalise 2 cents higher by the close of the London trading session. Losses of over 1.7% were seen against the US Dollar after the ECB press conference and just less than 1% against the Swiss Franc.
Once the dust settles on yesterday’s happenings it’s almost guaranteed that the Euro will appreciate against as the ECB will be raising interest rates again before the end of the summer which is significantly ahead of the UK or US. The markets are now pricing in an interest rate rise for the UK as late as December.
The Pound suffered against the US Dollar on release of the CIPS services PMI which showed a reduction in forecasted figures clearly pointing out the UK’s slow economic recovery. The 17 month high against the US Dollar is currently very far out of reach as the market has fallen through 1.64.
Buyers of the Aussie Dollar had slight relief on Thursday with the release of the Australian retail sales. Figures were way down on the predictions showing a contraction of -0.5% which immediately helped the Pound to capitalise and reach a high of 1.5480 before falling back down to 1.5430 to trade for the remainder of the afternoon.
Key data out today for the UK is the producer price index released at 09:30 GMT+1. This will give traders an insight into which way the CPI inflation report will swing when it is released in the next couple of weeks. A good result this morning will see Sterling put pressure on the Euro and possibly break back above the 1.13.
The Non-Farm Payroll report is once again due for the US this afternoon, Dollar buyers are hoping that this key US report will spur investors to dump the Dollar in favour of riskier currencies, which in conjunction with strong PPI figures from the UK could see the Pound chase down the 17 month high seen last week.
