ECB confirm quantitative easing to commence next week in low key statement

Enrique Díaz-Álvarez06/Μαρ/2015Currency Updates


Sterling traded mostly within a narrow band of the Dollar yesterday to finish the London session marginally down by 0.15%.

The Bank of England marked six straight years of record low interest rates on Thursday by keeping the benchmark borrowing rate constant once again at 0.5%. Results of the monetary policy vote will not be released by the central bank until the meeting minutes on the 18th March. In February, all members of the monetary policy committee voted to keep rates unchanged for the second consecutive month. However, with inflation and growth expected to trend upwards later this year we continue to expect a rate hike in Q4 this year. As far as data was concerned, Halifax’s house prices index declined by 0.3% month on month in February, taking the annualised measure to 8.3%.

Today we will see the Bank of England’s consumer inflation expectations at 9.30am.


A very low key and undramatic ECB press conference saw the Euro weaken by 0.45% to yet another fresh eleven-and-a-half year low against the Dollar and a seven year low versus Sterling.

The European Central Bank, as expected, kept interest rates unchanged yesterday. There was relatively little news from the press conference compared to the dramatic announcements we have seen in the previous meetings. It is worth noting, however, that the ECB forecasts for growth were lifted to 1.5% for 2015 on the back of a lower Euro and lower oil prices, and the central bank set its expectations for 2017 inflation at 1.8% – just about within target. Beyond that, we got little more than technical details about quantitative easing. The exact date at which the central bank will begin purchases of Government bonds was set as 9th March, and no bonds yielding less than -0.2% would be purchased. The ECB is obviously trying to keep a low profile while it implements the new QE program.

In terms of data on Thursday, factory orders decreased by 0.1% in Germany YoY, unemployment in France soared to its highest level in sixteen years to 10.4%, while growth in Italy was revised lower to -0.5% for Q4. Revised growth figures for the fourth quarter within the Eurozone at 10am today are the only major data release in an otherwise quiet end to the week.


The Euro’s loss was the Dollar’s gain on Thursday, as the Greenback rose by 0.3% to another multi-year high following Mario Draghi’s press conference.

New orders for US factory goods declined for the sixth straight month in January. Data from the Commerce department showed a 0.2% decrease MoM in January, after a slight increase was forecast. Manufacturing has been hurt in the US of late by a softening demand in Europe and Asia, a strong Dollar, and lower crude oil prices. Labour disputes at US West Coast ports, while now resolved, have also weighed on factory activity. Initial jobless claims disappointed again, rising to the highest level since May. Even the four-week moving average of claims rose, climbing by 10,250 to 304,750. This marked only the third time this year it had breached the significant 300,000 threshold. Elsewhere, nonfarm productivity contracted by 2.2% as output failed to keep up with a jump in hours, while Federal Reserve member John Williams stated he expected “full employment” in the US by the end of the year.

A significant afternoon in the US economy will see the release of the all-important nonfarm payroll figures for February at 1.30pm GMT. After last month’s better than expected reading, another solid month of job creation and low unemployment will most likely get markets to start pricing in an interest rate hike in June.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.