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January 2016

Daily Currency Insight

Published: Monday 25 January 2016

  • ECB hints at further easing
  • Oil begins to recover
  • Weekly highlight is FED meeting on Wednesday
Last week the Euro fell sharply after Mario Draghi hinted at further easing from the European Central Bank perhaps as early as the next meeting in March. He used the press conference after this month's meeting to state that the global outlook had deteriorated over the last couple of months and that a slowing China was a threat to the European economy. He also noted that the ECB had plenty of firepower left and that they would reassess and reconsider further quantitative easing at the next meeting. The Euro lost significant ground against the Pound and this looks set to continue until we get further confirmation.
 
The highlight this week will be the Federal Reserve meeting in the United States on Wednesday. It is unlikely that there will be any change to policy at this stage however it will be interesting to hear their thoughts on the falling oil price and the general slowdown in emerging markets. US data has been mostly positive of late so they may well remind markets that they are still expecting to raise rates 3 or 4 times in 2016. Currently the market is not pricing this in so a more hawkish FOMC will certainly see the dollar strengthen.
 
Today is fairly light on the data front with only the German IFO due this morning and little of note for the rest of the day. Expect a range trading day as traders keep their powder dry ahead of the Federal Reserve meeting on Wednesday.

 
FX Research by Ricky Nelson
Daily Currency Analysis with Charlie Horsley