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European Central Bank (ECB) Hints at QE Discussions in Autumn

Published: 20 Jul at 4 PM Tags: Euro, Dollar, Pound Sterling, America, UK, Eurozone, Australian Dollar, New Zealand Dollar, Canadian Dollar, Australia, New Zealand, USA, Canada, Japan,

Pound Sterling (GBP)
The Pound tumbled on Thursday as investors reacted to June’s UK retail sales results.

UK retail sales actually beat expectations in both major prints. Month-on-month retail sales improved from -1.1% to 0.6% while yearly retail sales rose from 0.9% to 2.9%.

However, analysts noted that the figures overall rounded off a flat performance for retail in the first half of 2017, amid a poor first quarter and a decent second quarter.

The June retail sales boost was also more to do with hot weather than consumer confidence. Analysts continue to suggest that Britain’s pay squeeze will have a concerning effect on the domestic economy in the second half of 2017.

US Dollar (USD)
The Pound to US Dollar exchange rate hit a new weekly low on Thursday as investors sold Sterling following mixed UK retail sales results.

The US Dollar initially got a burst in demand due to a dovish Bank of Japan (BoJ) and a Japanese Yen (JPY) selloff.

Later in the day though, investors opted to buy the Euro instead of either the Yen or US Dollar. As a result, GBP/USD recovered slightly from its weekly lows.

Euro (EUR)
The Euro saw a jump in demand following Thursday’s European Central Bank (ECB) meeting, despite the overall dovish tone of ECB President Mario Draghi.

The ECB left monetary policy at its loosest levels on record as expected and reminded markets that it could still extend its quantitative easing (QE) scheme if necessary.

However, in a press conference ECB President Draghi hinted that the bank was likely to discuss the future of its QE plan in the autumn. Speculation flared up that the ECB could announce an end-date for its QE as soon as September, leading to stronger Euro demand and pushing GBP EUR to a new 2017 low towards the end of the day’s European session.

Australian Dollar (AUD)
The Pound to Australian Dollar exchange rate briefly recovered from its weekly lows on Thursday morning as investors reacted to Australia’s underwhelming June employment results.

Towards the end of the day though, GBP/AUD hit new multi-month lows due to market disappointment with Britain’s economic outlook.

The Australian Dollar saw mixed demand throughout the day, but overall the employment data was not poor enough to lead to the big ‘Aussie’ selloff some analysts have recently warned of.

New Zealand Dollar (NZD)
The Pound to New Zealand Dollar exchange rate slumped to a new July low in reaction to this week’s UK retail sales stats, despite the figures beating expectations.

Concerns about Britain’s economic outlook for the second half of 2017, as well as how Brexit negotiations could make the economic outlook even worse, led to Thursday’s broad Pound weakness.

Canadian Dollar (CAD)
The Pound to Canadian Dollar exchange rate, like many other Pound exchange rates, trended near its worst July levels towards the end of Thursday’s session due to concerns on Britain’s economic outlook. GBP/CAD currently trends near its worst levels since February.

The oil-correlated Canadian Dollar has seen decent support over the last few days due to an increase in oil price. Brent crude reached above US$50 per barrel this week due to a drop in US oil stockpiles.
As of Thursday, 20th July 2017, the Pound Sterling currency rates mentioned within this news item were as follows:

GBP EUR exchange rate was 1.1152, GBP USD exchange rate was 1.2967, GBP AUD exchange rate was 1.6304, GBP NZD exchange rate was 1.7516, GBP CAD exchange rate was 1.6333, and GBP JPY exchange rate was 145.0602.
Dominic Lee About Author: (474 Posts)With over ten years experience as an economist – including four years spent as a chief economist with a major currency broker – Dominic has acquired a wealth of knowledge which he uses to forecast market movements. Dominic now works as an independent business advisor and writes for several financial publications.

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