Draghi?s Comments Send GBP EUR Exchange Rate Higher

Published: Thursday, 6 December 2012 18:00 BST - Written by Toni Johnson

STORY LINK Draghi?s Comments Send GBP EUR Exchange Rate Higher

The euro has suffered a concerted bout of selling pressure this afternoon thanks to comments made by European Central Bank President Mario Draghi in his post-policy announcement press conference. Draghi dropped heavy hints that his Bank may well cut its key lending rate in the early part of 2013 when he commented that the EBC’s board members had taken part in a ‘wide discussion’ for an interest rate cut. The ECB had earlier elected to maintain its key lending rate at 0.75%.

The market’s knee jerk reaction was to sell the single currency, sending the GBP EUR exchange rate up to 1.2359 by the middle part of this afternoon’s European session. The euro had been under some selling pressure before Draghi took to his lectern, following this morning’s whole of eurozone Gross Domestic Product data which showed a quarterly contraction of 0.1%. In truth, the figure was exactly as per analysts’ expectations, however it was still generally considered to be bad news for the single currency that the during the three months to the end of September economic activity in mainland Europe shrank, especially given the healthy levels of growth in the UK and the USA during the same time period.

Elsewhere, the Bank of England announced earlier today that it had elected to maintain its current monetary policy stance – i.e. there will be no increase to the UK’s Quantitative Easing policy in the near-term. The news will come as a relief to investors holding Sterling-denominated assets, some of whom were factoring-in an increase top the Bank’s asset purchase scheme.

Meanwhile, on the other side of the Atlantic, this morning’s North American session has seen the release of some encouraging US labour market data ahead of tomorrow’s key Non-Farm Payrolls data for December. The Initial Jobless Claims figure showed at below expectations, suggesting that tomorrow’s release may better expectations.

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