Euro To Dollar Outlook: ECB To Ease Policy In March 2016 Warn Commerzbank
Last updated: 22 Feb 2016
Written by Colin Lawrence for Exchange Rates (UK)
It is not just the British pound which is being affected by the uncertainty surrounding a
‘Brexit’, according to ING Bank economist Bert Coljin, whose assessment of today’s
Eurozone PMIs could be bad news for the euro to pound spot rate.
Coljin believes that ‘Brexit’ fears could be harming Eurozone growth, explaining that it had been ‘weighed down by uncertainty about the global economy, but also by fears closer to home, like the uncertainty surrounding a possible Brexit.’
In response to mostly disappointing domestic data the euro exchange rate declined versus nearly all of its major peers.
Euro exchange rates are predicted to come under further pressure in March with many analysts forecasting looser monetary policy from the European Central Bank (ECB). The current ECB interest rate is 0.05%.
The single currency declined versus all but the British Pound after London Mayor Boris
Johnson’s support of the campaign for the UK to leave the European Union caused the GBP to crash.
The latest FX rates for your reference: On Monday the pound to euro exchange rate is at
1.283 EUR/GBP. The EUR to USD exchange rate converts at 1.103 USD/EUR. The EUR to
AUD exchange rate converts at 1.526 AUD/EUR today.
Euro dive after French services output unexpectedly contracts.
European economic stats provided a number of disappointing results today. With the exception of the German Services PMI (Purchasing Managers’ Index) all Eurozone publications failed to meet with respective market consensuses.
Of particular disappointment was the French Services and Composite PMIs which both dropped below the 50 mark that separates growth from contraction.
The German Manufacturing and Composite PMIs, plus the Eurozone Manufacturing,
Services and Composite PMIs all failed to meet with the respective median market forecasts.
Analysts at Commerzbank predict that the European Central Bank will look to ease policy in
March, and the extent of the corresponding Euro depreciation will be determined by the aggressiveness of the stimulus measures employed.
“It is very likely that the ECB will loosen its monetary policy further in March. Whether and to what extent the EUR will come under pressure depends on how extensive the package of measures is. In our view, the risk of aggressive monetary easing and thus also of significant
EUR depreciation is being underestimated on the market. We recommend EUR sellers to hedge against this risk with a risk reversal.”