Yesterday the Euro enjoyed its strongest gain for two weeks against the US Dollar and advanced on the Pound as the European Central Bank left fiscal policy unaltered.
After the rate decision was announced ECB President Mario Draghi asserted; ‘We remain firmly determined to maintain the high degree of monetary accommodation and to take further decisive action if required. We firmly reiterate our forward guidance. We continue to expect the key ECB interest rates to remain at present or lower levels.’
However, the common currency trimmed its advance today as the German high court asked Europe’s most prestigious lawmakers to question the legality of the ECB’s Outright Monetary Transactions bond-buying programme.
Although the OMT scheme has its supporters, its detractors have been particularly vocal and some leading German figures have dubbed it unconstitutional.
The news caused the Euro to edge away from this week’s highs and the currency came under additional pressure after the Eurozone’s main economic report for the day was published.
A week of largely disappointing data for the Eurozone was rounded off by a less-than-impressive industrial production report for Germany.
The currency bloc’s largest economy was expecting industrial production to have increased by a seasonally adjusted 0.3 per cent in December, month-on-month, but it actually declined by 0.6 per cent.
November’s figure was positively revised to a gain of 2.4 per cent.
On the year industrial production advanced by 2.6 per cent, less than the 3.5 per cent gain expected and down from November’s 3.8 per cent advance.
While the appeal of the Pound was slightly dented by the UK’s own disappointing industrial output report, the news that the UK’s trade deficit narrowed by considerably more than forecast in December limited Sterling losses.
Before the weekend further EUR/GBP movement could occur in response to the NEISR GDP estimate for the UK.
Britain recorded growth of 0.7 per cent in December, but a slackening in services/manufacturing sector expansion could see January’s figure come in below this level.
Eurozone data to be aware of next week includes industrial production figures for the currency bloc, the European council meeting, Eurozone trade balance figures and the region’s flash GDP report for the fourth quarter.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,
,Pound Sterling,0.8300,
Euro,,US Dollar,1.3564,
Euro,,Canadian Dollar,1.5004,
Euro,,Australian Dollar,1.5163 ,
Euro,,New Zealand Dollar,1.6478 ,
US Dollar,,Euro ,0.7370,
Pound Sterling,,Euro,1.2043,
Canadian Dollar,,Euro,0.6666 ,
Australian Dollar,,Euro,0.6596,
New Zealand Dollar,,Euro,0.6060 ,
[/table]
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