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Eurozone wins the day

Eurozone wins the day

The path of the GBPUSD yesterday was almost perfectly U-shaped when viewing the currency pair on a chart. Starting the day at around the 1.5330 mark, dipping during the course of trading to around 1.5260, before returning to almost the same levels as we opened on. The GBPEUR on the other hand was really one way traffic from the open, falling from 1.3750 to 1.3600 in a rapid decline.

The focus yesterday for economic news surely must have been the European Central Bank (ECB) press conference and Monetary Policy Committee. Mario Draghi must have breathed a sigh of relief that no glitter wielding protesters managed to sneak through security clearance this time. The core message was that the aggressive bond buying programme (Quantitative Easing programme) was working very well.

We had seen an increase in the core inflation rate in the most recent figure, so Quantitative Easing can claim to have worked effectively so far. In light of some of the positive changes attributed to the programme thus far, it is not to be curtailed any time soon. Draghi is keen to allow the impact to further embed before reviewing the decision to retire it, saying that the recent uptick in inflation was (in effect) near term fluctuations. The ECB have upwardly revised their inflation forecast for consumers to 0.3% against an initial estimate of 0.0%, but the inflation forecast for next year has not changed at 1.5%.

Yesterday, we had a string of economic releases so I shall recap these. The EUR Services Purchasing Managers Index was slightly stronger than expected and showing moderate growth at 53.8. Spanish Services PMI was pared back slightly, but still shows strong growth at 58.4. The Eurozone unemployment rate was stronger, reducing to 11.1% against an expectation of 11.2%. Eurozone Retail Sales was stronger also at 2.2% against the expectation of 2.0%. The ECB interest rate decision was, of course, unchanged.

Today, we have the UK interest rate decision and a decision on our own Quantitative Easing (Asset Purchase) programme. We have a number of jobs data releases from the States during the day today.

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