As the week ends, the Euro managed to recover some ground on the back of improving market sentiment against the Pound (GBP) and US Dollar (USD).
The markets took a beating this week with all of the major currencies experiencing huge spikes in volatility. Sentiment improved slightly as traders and investors dusted themselves off following one of the most volatile periods seen in the global financial markets in years.
Worries over the health of the global economy and in particular the Eurozone economy remain high but comments made by US and European policymakers eased some of the concerns. Strong data from the USA on Thursday also helped settle nerves.
‘It’s been a lively week, but it seems a bit calmer today. People are hoping to hear some soothing words from policymakers and it wouldn’t be surprising to hear some dovish comments…and that kind of rhetoric would certainly help settle markets,’ said Alvin Tan, a FX strategist at Societe Generale.
US Federal Reserve President of St Louis James Bullard helped ease market nerves as he said that the Fed might want to maintain its bond buying stimulus programme due to the drop in inflation expectations. A similar sentiment was given by the Bank of England’s chief economist Andrew Haldane who said that the BoE should leave interest rates low in order for the UK to avoid a period of stagnation.
His comments weighed upon the Pound, which had been finding support from positive unemployment benefit and comments by BoE Policy maker Martin Weale who in contrast with Haldane had urged a rate hike and told the Bank to ignore the low inflation report and instead focus on economic growth.
“Put in rather plainer English, I am gloomier,” Mr Haldane said. “This implies interest rates could remain lower for longer, certainly than I had expected three months ago.”
Euro Sentiment Improves on Coeure Comments
The Euro found support from comments made by European Central Bank Executive Board Member Benoit Coeure who said that the Eurozone economy remains on the path to recovery and that the bank expects the economy to grow in the third and fourth quarters.
‘The Eurozone is still on a recovery path. We expect growth to be positive in the third quarter and the fourth quarter in the Eurozone,’ Coeure said. He also added that policy makers are prepared to take additional non-conventional measures if needed to stimulate growth.
The words eased concerns that the Eurozone is sliding towards a triple dip recession and caused investors to ignore weak Construction Output Data. The report showed that activity in the sector fell for a third consecutive month on an annual basis.
Euro Exchange Rate News:
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