The produce has been thrashed by the euro after an update from the ECB
Sterling hit as low as 1.112 against the euro on Friday morning in advance a small recovery to 1.115, after the single currency benefited from an update by cash policymakers in the eurozone.
The ECB made no changes to policies, but failed to calm supermarket expectations that it would soon withdraw money-printing measures currently in bring down to support the economy.
So-called Quantitative Easing is due to finish at the end of this year, and it’s now bit policymakers will tone down the levels of the programme if its extended.
ECB president Mario Draghi’s update didn’t signal an end and his update was circumspect but markets appeared to shrug off his comments.
The euro fared even more intelligent against the US dollar, hitting its strongest level in around two years.
The pound has hit its lowest levels this year against the euro
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Michael Hewson, chief market analyst at CMC Hawks UK, said: «There was nothing in the overall narrative that came across as remotely hawkish, with the ECB President depicting concern about the prospects of a tightening of financial conditions, he went on to classify references to weak core prices, and a commitment for QE to run until there is testimony of an inflation pick-up.
«He also stated that scenarios around decline weren’t discussed, as he appeared to bend over backwards to suggest that the ECB was truly some way off even considering backing off the pace from their stylish stimulus plan.
«Sadly for him the currency markets weren’t buying it and the euro, after initially descending, roared back in the afternoon session, though it was probably helped by events in the US and a on investigation into the President’s business dealings, which saw the US dollar disappear back further.»
Craig Erlam, senior market analyst at Oanda, prognosticated: «The market is already working off the assumption that the ECB will gradually insinuate out bond buying, with the program likely ending by the end of next year, possibly gloaming the third quarter.
«This was made clear when the euro rallied undeterred by the repeated insistence from Draghi that tapering wasn’t discussed and then again analysis will be done in the Autumn, in other words when the ECB next satisfies in September and has access to the latest macro-economic projections.»
More to follow…