ECB QE Details Raise Greece Fears ? Gains Forecast for GBP AUD and GBP NZD Exchange Rates

March 5, 2015 - Written by John Cameron

STORY LINK ECB QE Details Raise Greece Fears ? Gains Forecast for GBP AUD and GBP NZD Exchange Rates

The European Central Bank (ECB) revealed the minutiae of its Quantitative Easing programme earlier today and investors shifted out of euro-denominated assets as a result. The Pound Sterling euro exchange rate broke to a fresh 7 ½ year high of 1.3846 GBP EUR during this afternoon’s session following ECB Chief Mario Draghi’s press conference which followed his bank’s lunchtime policy announcement.

The Head Man at the ECB confirmed that its controversial Quantitative Easing programme will commence on 9th March. Initially, market sentiment soared at the prospect of the sustained flow of ‘easy money’ out of the euroland, for the next 18 months at least. The release of the details of the scheme initially helped the risk-driven New Zealand Dollar (currency:NZD) and Australian Dollar (currency:AUD) improve against Sterling and the other low-yielders. The Kiwi, in particular, fared well against the other major global currencies, with the euro New Zealand Dollar exchange rate EUR NZD slumping to its lowest ever level since the single currency was instigated in 1999. However, subsequent price action has seen the New Zealand unit give up a large part of its intraday gains as market participants expressed their nervousness about certain details contained in Draghi’s proposals.

One factor holding back risk sentiment this afternoon has been investors’ impression that there may be further tension to come between the euroland’s reserve bank and Greece following Draghi’s confirmation that the ECB’s asset purchase scheme will not involving the buying-up of any Greek gilts because they have been deemed to be of an insufficient quality. The ECB’s confirmation that there will be no primary market purchases of bonds as part of the scheme also raised questions.

The Commodity Dollars were susceptible to a downward movement on the day even before Draghi took to the lectern; last night’ s announcement from China’s policymakers that they had set a GDP growth target of ‘about 7.0%’ for 2015 came as bad news for exporters across the world. China’s leaders had set a counterpart target of 7.5% for last year – the downward revision for this year’s goal suggests that China’s rulers will continue aim to achieve a more balanced economy which is less dependent on foreign imports.

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