European Central Bank (ECB) President Mario Draghi’s comments that he will not sit back and wait for new stimulus measures to take effect continued to support the Euro (EUR) to Pound (GBP) exchange rate on Tuesday.
During Monday’s testimony to European lawmakers Draghi said that the Eurozone’s central bank will move to take a more ‘active and controlled management of our balance sheet’. The ECB president also said that the bank would leave open the option of quantitative easing.
‘Outright purchases will increase the size of the ECB’s balance sheet, but the additional risk exposure will be limited. We stand ready to use additional unconventional instruments within our mandate, and alter the size and/or the composition of our unconventional interventions should it become necessary,’ Draghi said.
The comments were enough to send the Euro higher against several major peers. Against the Pound, the single currency regained some of the ground lost last week after Scotland voted in favour of remaining a part of the United Kingdom.
On Tuesday, the Euro advanced to a session high against the Pound and US Dollar as Draghi’s comments continued to offer some support.
The single currency was able to hold onto gains despite economic data showed that private sector output across the Eurozone grew at its slowest pace of the year so far in September, contributing to fears that the region’s economy is heading towards a new recession. Manufacturing growth also slowed.
The Purchasing Managers Indexes for both the manufacturing and service sectors showed that growth slowed this month. Both industries saw their Purchasing Managers Indexes (PMI) fall and the composite PMI declined from 52.5 recorded in August to 52.3 in September.
Data out of France also widely disappointed with a report confirming that the nation’s economy stagnated in the second quarter and that the expected growth rate dropped below economist expectations.
German data however countered some of that negativity as its composite PMI came in slightly above expectations.
‘The survey paints a picture of ongoing malaise in the Eurozone economy. Prices continued to fall as firms fought for customers, which will inevitably heighten concerns that the region is facing deflation. There are also worrying signs that growth could slow further in the fourth quarter,’ said Chris Williamson, chief economist at Markit.
The Pound meanwhile received no support from the latest borrowing figures. The data showed that the UK borrowed more last month than in August 2013, despite the strong growth recorded over the past year.
According to the Office for National Statistics, public sector borrowing increased by £700 million a total of £11.6 billion.
Euro Exchange Rate News:
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