The Euro (EUR) exchange rate weakened against the Pound (GBP) and US Dollar (USD) on Tuesday following the release of a report which suggested that the European Central Bank (ECB) is planning to step up its plans to try to revive the flagging Eurozone economy.
According to the report, the ECB is planning to buy corporate bonds on the secondary market by as soon as early next year, (some economists believe that the plan could come into effect as soon as December), in an attempt to encourage bank lending to businesses and ease the deflationary threat to the single currency bloc.
The ECB has already started buying covered bonds, a part of a private-sector asset-purchase program that will also see it buy bundled loans known as asset-backed securities (ABS) later in the year. However, there is concern at the ECB that these measures may have an insufficient impact to help support the economy.
With the Eurozone heading towards a triple dip recession, the markets are hoping that the ECB will introduce new measures to try to encourage growth and inflation across the region. The new measures could see the ECB clash with Germany however, as the regions largest economy has been opposed to such measures.
As the news broke, the Euro weakened against both the Pound and US Dollar. Market attention will now look ahead to December’s ECB policy meeting for further indications as to whether the bank will proceed with the new measures.
The Euro was also under pressure from reduced sentiment after Germany’s Bundesbank said that the region’s largest economy saw hardly any growth in the third quarter of the year. The bank added that it did not think that Germany would enter recession but the economic outlook for the fourth quarter is cautious.
Data out Finland disappointed as unemployment in the nation increased sharply from August’s level of 7.4% to 8.5% in September.
With a lack of economic data for the Eurozone on Wednesday, we can expect the Euro to remain under pressure against the Pound and US Dollar. The GBP/EUR exchange rate could see some volatility if the latest Bank of England policy meeting minutes strike a dovish tone.
US Dollar traders will want to keep an eye on the release of the latest US inflation data. A weak figure is likely to soften the currency and heighten concerns over the strength of the world’s largest economy and the wider global economy.
Euro Exchange Rate News:
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