With the ECB asserting that it would be assessing whether or not to expand quantitative easing in December, the euro tumbled against the majority of its currency counterparts.
As the EUR/USD exchange rate is the world’s most traded, the plummeting euro sent the US dollar trending higher and the GBP/USD exchange rate came under pressure as a result.
The pound sterling to euro (GBP/EUR) currency pair advanced above the 1.38 level and could extend gains this week if European data continues supporting the case in favour of further fiscal support for the Eurozone from the ECB.
So, what should we be looking out for?
Pound sterling (GBP) exchange rate to react to growth and consumer confidence data
The UK is set to publish both preliminary third quarter growth data and its latest consumer confidence report.
The consumer confidence measure printed at three in September, if the gauge strengthened further in October the pound could rally. Other UK reports with the potential to initiate GBP exchange rate movement include the BBA Loans for House Purchase, Nationwide House Price and CBI Reported Sales figures. Some investors are beginning to forecast that the Bank of England (BoE) could look to start increasing borrowing costs ahead of the Federal Reserve. If the upcoming UK reports increase the odds of that occurring, sterling will be supported.
Exchange rates can be extremely volatile. Look into registering for regular market updates if you want to stay up-to-date with the latest market movements.
Euro (EUR) exchange rate volatility expected on Eurozone CPI
Draghi was dovish when discussing the Eurozone’s economic outlook and the likelihood of the central bank expanding quantitative easing will increase if this week’s Eurozone Consumer Price Index for October shows that inflationary pressures in the currency bloc remain weak.
On the subject of QE Draghi commented, “We are ready to act if needed… and we are open to the full menu of monetary policy.“
The Eurozone is also due to publish unemployment and economic confidence data, with negative results potentially spurring the euro’s current downtrend.
US dollar (USD) conversion rate could plummet on dovish FOMC
The news that markets will be bracing themselves for this week is the Federal Open Market Committee (FOMC) interest rate decision. After the September meeting yielded no change in interest rates, October was eyed as the month for an adjustment. But then the Non-Farm Payrolls report came in wildly below forecast and hopes for a revision being made any time in 2015 were dashed. While some industry experts believe the Fed could make a small change, most are expecting policymakers to hang fire.
Dovish commentary from the Fed may drive the US dollar lower before the coming weekend, but if the FOMC policy statement infers that interest rates will rise in December, we can expect the ‘Greenback’ to rally.
Exchange rate movements can be swift and dramatic, so if you’ve got a currency requirement coming up and want to move your funds at the right time you may want to have a chat with a currency specialist.
Contributed by TorFX
TorFX is a specialist currency broker that offers far better exchange rates than you are likely to receive from a high street bank.