ECB remain committed to full QE programme despite strong recovery

Enrique Díaz-Álvarez16/Apr/2015Currency Updates


Sterling rose throughout trading on Wednesday, hitting a weekly high on the Dollar having appreciated by 0.25% versus Greenback.

There was limited economic news in Britain on Wednesday. The Conference Board’s leading economic index, a measure of current economic activity, did, however, increase in March. The index climbed by 0.6% to mark its strongest monthly gain since July last year following a reading of just 0.2% a month previous. The General Election campaigning continued to steal the headlines as the Liberal Democrats and UK Independent Party both launched their respective manifestos. Meanwhile, President of the European Commission Jean-Claude Juncker ruled out a treaty negotiation regarding Britain’s relationship with Europe until two years after David Cameron’s promised referendum. This came amid reports on Britain’s “solid” recovery from the IMF, which will no doubt provide a boost to the Conservatives.

A lack of data release in the UK today means traders attention will shift to the election, with just three weeks to go until polls open.


Despite a temporary spike in the Euro following the ECB monetary policy statement, the single currency fell against the Dollar yesterday, down by 0.4%.

An otherwise uneventful ECB press conference was dramatically disrupted after an anti-ECB protestor rushed the stage and threw confetti at President Mario Draghi. The protestor was removed and, after a brief five minute break, Draghi returned to give an upbeat assessment of Economic conditions in the Eurozone, claiming better-than-expected economic indicator figures have added to a recent wave of optimism about the currency area’s recovery. However, despite this stronger outlook, slowing the pace of its €60billion per month bond buying quantitative easing program is not on the agenda according to Draghi, despite speculation to the contrary. Notably, Draghi sidestepped all questions on Greece, reiterating its fate was in the hands of the Greek Government. Earlier the central bank had unsurprisingly kept rates on hold for the sixth consecutive meeting.

Away from events in Frankfurt, inflation in Germany was confirmed at an annualised 0.3% in March, up from 0.2% in February, while price growth in France stabilised, reading flat year-on-year. The Eurozone trade surplus also surged higher in February from a revised €7.6 billion to €20.3 billion.

This morning we’ll see the release of trade data from Italy at around 9am in an otherwise quiet day for the Eurozone economy.


Wednesday was a mixed day for the Dollar with the US Dollar index trading within a narrow band to finish 0.15% higher.

Federal Reserve hawk James Bullard claimed falling unemployment and an improving US economy are evidence that the Federal Reserve should start hiking rates soon, in line with our long standing expectation. The St. Louis Fed President sees a risk of remaining at the zero bound for too long, which could cause a significant asset market bubble to develop.

There were further signs that the strong Dollar is hampering performance in the industrial sector, with production falling by 0.6% in March and posting its first quarterly decline since the recession ended. Production decreased by an annualised 1% in Q1 after a downward revision for January’s data, driven predominantly by bad winter weather. Elsewhere, capital utilisation, the percentage of production capacity used in the US economy, dipped marginally in March, down from 79% to 78.4%. The NAHB housing market index rose to 56 in April from a revised 52, while mortgage application fell marginally last week by 2.3%.

There are a number of economic releases in the US today with traders paying close attention to jobless claims figures at 1.30pm this afternoon.

Rest of the world

Disappointing trade data in China on Tuesday was followed by further weak growth figures in the world’s second largest economy yesterday. The Chinese economy expanded by 7% YoY in March, its slowest pace since the global financial crisis.


Written by Enrique Díaz-Álvarez

Chief Risk Officer at Ebury. Committed to mitigating FX risk through tailored strategies, detailed market insight, and FXFC forecasting for Bloomberg.