The European Central Bank has done very little to benefit the Euro in the past days and weeks. Following the ECB Bank Rate decision on the 8th March the Euro has underperformed. The rhetoric that emerged during the early afternoon press conference following the monetary policy decision has been sustained by a number of central bank speakers recently.
This morning alone, ECB President Mario Draghi spoke publicly in Frankfurt. The Euro reacted negatively following Draghi’s speech, while markets priced in his comments surrounding the cessation of Quantitative Easing and inflation. The asset purchase program (QE) is weighing on the value of the Euro as the central bank continues to flood markets with cash. The ultra-loose monetary policy that currently pervades throughout the Eurozone has been tightening, albeit very slowly.
The take away message from Mario Draghi this morning was that as much as the ECB feels it is time to wrap up the sustained increase in net asset purchases, inflation is simply not there to facilitate the change. When considered amongst its G-10 counterparts, the Euro appears as a definite laggard, allowing Sterling to appreciate to €1.13 to the Pound.
Discussion and Analysis by Charles Porter