Euros to pounds: Exchange Rate Markets Punish EUR as ECB's Hansson opens his mouth
In the wake of this morning's comments by the ECB's Ardo Hansson we see the following exchange rates:
The euro to pound exchange rate has fallen to 0.8347 at 09:40 in London. The exchange rate is 0.13 pct lower than seen at Friday's close.
GBP/EUR is thus at 1.1980; still below the formidable resistance level at 1.2.
The euro dollar exchange rate has meanwhile suffered a 0.3 pct fall having reached 1.3517.
The euro is certainly suffering against the US dollar to a greater extent; we attribute the resistance seen at 1.2 as being key to understanding why GBP/EUR is lagging the EUR/USD in the wake of the comments.
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Erdo Hansson talks the euro lower
Hansson tells Bloomberg today that the ECB stands ready to cut borrowing costs further and is technically prepared to make its deposit rate negative:
"The options on rate cuts are still not fully exhausted and there are all kinds of other measures that are still on the table.
"Of course, every time you use one option, you have one less to use. But I don’t see us, by any means, running out of our toolkit of things we can draw on."
Other highlights:
- Inflation toward the lower end for some time
- No evidence of disanchored inflation expectations
- ECB will discuss publishing minutes soon
- Risky if ECB minutes reveal individual votes
- Doesn't see ECB running out of options
- Small-than-normal depo rate cut not off the table
- ECB is technically ready for negative deposit rate
Expect the euro to remain under pressure in this environment of uncertainty concerning ECB policy.
British pound could be boosted by GDP review later this week
Turning to the British pound sterling there is little on the economic calendar this week.
The highlight will be the revision to UK GDP:
"This week sees the first revision of UK Q3 GDP, and while this is likely to be unrevised, we see risks to the upside. This could be a trigger for a GBP/USD break higher, but there is already enough positive UK news to justify new GBP/USD highs for the year," say Lloyds Bank Research.
British pound sees strength across the board
So will this week finally see sterling break above the 1.2 level against the euro. (Euros to pounds @ 0.8333).
Carl Hasty, Director, Smart Currency Business points out that at present the GBP is enjoying strong momentum:
"Sterling finished the week in largely positive fashion, enjoying gains against most of its major partners. These movements came thanks to data showing that factory orders had increased to the highest level in almost 20 years and resulted in sterling ending the week up against the US dollar for the third consecutive week.
"However, sterling did fall slightly from its recent highs against the euro following the release of strong German data. This week holds a few key events and releases liable to impact the markets.
"This morning we will have mortgage approvals figures released and on Tuesday we will have the inflation report hearings from the Bank of England (BoE) which will include the central banks economic outlook."