EUR rises, then falls after Draghi’s indication on negative deposit rate

EUR rises, then falls after Draghi’s indication on negative deposit rate

Sinduja Venkat

Good morning and welcome to today’s foreign exchange market commentary on Friday the 3rd of May. 

Here are MyCurrencyTransfer.com’s top 5 currency highlights:

  • EUR rises, then falls after Draghi’s indication on negative deposit  rate
  • USD appreciates on the back of ECB’S rate cut decision and expanding economic growth
  • CAD gains following trade surplus
  • Sterling shows mixed reaction following release of manufacturing data
  • AUD continues to be under pressure owing to global growth concerns and weak China data

CURRENCY RATES OVERVIEW 

GBP/EURO – 1.19
GBP/USD – 1.55
GBP/CHF – 1.45
GBP/CAD – 1.56
GBP/AUD – 1.51
GBP/ZAR – 13.91
GBP/JPY – 152.03
GBP/HKD – 12.04      
GBP/NZD – 1.83
GBP/SEK – 10.13

Exchange rates valid as on 2013-05-02 16:00 GMT

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Key releases in the next 24 hours that may affect currency date:

Australia: No Data
Europe: EUR Euro-Zone Producer Price Index (YoY), EUR Euro-Zone Producer Price Index (MoM)
United Kingdom: GBP Purchasing Manager Index Services
New Zealand: No data
United States of America: USD Change in Non-farm Payrolls, USD Unemployment Rate
China: No Data
Canada: No Data

EUR rises, then falls after Draghi’s indication on negative rate

Euro value fell against the USD after the European Central Bank President Mario Draghi made a statement that policy makers would be open to implementing negative deposit rates.

Euro gained against its peers after the ECB cut its key interest rate to 0.5%, a record low in this instance. Following this the currency dropped after Draghi indicated in his press conference that he would also support measures such as negative deposit rates.

This is an unwelcome move from Draghi as far as investors are concerned because a negative deposit rate would likely encourage banks to “flood” the ECB with Euro deposits and this sudden inflow into the Eurozone financial system would weaken the Euro.

USD appreciates on the back of ECB’S rate cut decision and expanding economic growth

The USD gained against its peers yesterday following the release of positive US economic data as well as the European Central Bank’s much awaited decision to slash interest rates to new lows. A U.S. report released yesterday indicated that the number of Americans filing claims for jobless benefits had unexpectedly dropped to a five-year low.

Sterling shows mixed reaction following release of manufacturing data

After gaining by 2.7 % over the last month the sterling tumbled against the USD for the first time in a week. This decline was caused by release of weak manufacturing data for the month of April.  Investors’ mood continued to remain bearish in the event that UK GDP growth begins to stall in the coming months as it is expected that the Bank of England may extend its stimulus programme further by making asset purchases. An announcement on BoE’s stance is likely to be announced in the coming week following its quarterly economic forecast data release.

CAD gains following trade surplus

The Canadian dollar made strong gains against the USD after a higher than expected trade surplus figure was reported surprising market participants. The report indicated a growth in levels of export by $24 million in March as compared to levels of imports following a $1.25 billion deficit in February.  The report also indicated a rise in levels of exports by 5.1% while a rise of 1.7% was observed in the levels of imports. This would be the first trade surplus reported by Canada since March 2012.

AUD continues to be under pressure owing to global growth concerns and weak China data

AUD continues to depreciate against its peers. The currency hit the lowest in two months against the Euro and Pound as there were growing concerns from market participants over global growth causing investors to purchase government bonds. The currency also recently came under pressure following the release of weak manufacturing data from China.

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