ECB?s Monthly Report Reassures Investors, Taking GBP EUR Exchange Rate Lower

October 11, 2012 - Written by David Woodsmith

STORY LINK ECB?s Monthly Report Reassures Investors, Taking GBP EUR Exchange Rate Lower

This morning’s major release of note in the currency markets came in the form of the latest edition of the European Central Bank’s Monthly Report. The publication focussed on legal issues surrounding its Outright Monetary Transactions policy, which ECB President Mario Draghi announced last month. Effectively, the OMT scheme sees Europe’s central bank enter into global bond markets in an effort to support the government gilts of debt-ridden member states. Draghi confirmed earlier this week that the scheme has now started operating, providing a boon for the euro. Analysts had been concerned about the scheme’s viability following comments from German policymakers who openly doubted its legality. Today’s ECB Report quoted chapter and verse the EC legislation which proved that it is indeed permitted.

The single currency has once again firmed on the day, following the release of the ECB’s publication. This has seen the GBP EUR exchange rate dip down to 1.2403 on the session.

Elsewhere, this morning’s French inflation figures showed that the rate of domestic price rises in the country is tumbling. The CPI figure stood at 2.1%in August, but dipped to 1.9% last month. A cooling in prices in such a major economy will serve to stoke rumours that the European Central Bank may opt to cut its key lending rate from 0.75% sooner rather than later, as the spectre of inflation appears to be lifting from mainland Europe.

Meanwhile, tomorrow’s data schedule is rather limited in comparison to last Friday’s action-packed day. This means that the major currency pairs are expected to trade within tight ranges, barring any major news stories or comments from policymakers.

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