The Euro fell sharply yesterday afternoon as the markets attention focused on the European Central Bank policy meeting later today. The Euro weakened due to the market speculation on the true impact of the imminent quantitative easing, which is due to start next week. The sell-off of the single currency saw it fall to an 11 year low against the greenback, and also at an 8 year low against the pound. Further volatility is going to be seen as the head of the ECB Mario Draghi speaks at the press conference after the central bank releases their interest rate decision. If his recent comments are anything to go by it is likely that we will see a slightly more hawkish tone, but will this enough to curb the Euro’s losses?
The US Services PMI missed expectations yesterday registering 56.7, this coupled with the bullish manufacturing and construction PMI’s figures gives a clear picture as to why the pound has failed to make gains so far this week. Despite not making any gains the Pound has remained stable as the Services PMI results showed that businesses hired staff at the second fastest rate on record, wages rose and new orders increased. Economists consensus is that the UK’s economy has started 2015 strongly.
Also on yesterday’s jam packed docket was the first look into the USA’s non-farm payrolls on Friday. Recently the ADP has been accurate in predicting the direction of the all-important non-farm payroll numbers. Private sector employment increased by 212k jobs from January to February, the lowest reading this year, resulting in economists’ forecasting a slightly worse than expected figure on Friday.
Finally yesterday, the US released their version of the UK’s services PMI, the ISM non-manufacturing index. Above 50 indicates expansion in the sector and below contraction. The reading was forecast to post 56.5 meeting the yearly average. The figure exceeded expectations slightly and ticked just above this at 56.9.
Today’s docket will be dominated by Central Bank speakers. Starting with the Bank of England who release their official bank rate and asset purchase facility, a statement being released is tentative. Following this we have the week’s main event with today’s Draghi led press conference scheduled at 13:30. The ECB will no doubt face heavy scrutiny over Greece at this week’s press conference due to the geographical location of the meeting. Any mention about bailouts and/or Greek debt negotiations should cause high levels of volatility in the Euro.