Life has become more difficult for the euro. In the last week it was the worst-performing major currency, alongside the Swiss franc. The euro was down by half a US cent and it was one cent lower against sterling. It lost more than three and a half cents to the week’s top performer, the Australian dollar.
The mediocre Euroland economic data did not help its case. Monthly barometers of the manufacturing and services sectors showed mostly slower-than-expected growth, although the figures from France were the strongest for two years. German business confidence was weaker, Italian retail sales were down on the year and euro zone consumers remained pessimistic, albeit a little less so than a month earlier.
But it was not the ecostats that made investors keep their distance from the euro. It was the central bankers. There are 19 central bank chiefs in the euro area; one in each of the 18 member countries and Mario Draghi at the helm of the European Central Bank in Frankfurt. All are members of the ECB Governing Council, which sets monetary policy and interest rates at its meetings on the first Thursday of each month. In recent days a handful of those central bankers have come out with remarks which cast doubt on Sig. Draghi’s reassurance that there is no threat of deflation in Euroland.
The most striking comment came from the head of Germany’s Bundesbank, arguably the most influential of the 18 national central bankers. He said it was not impossible to imagine the ECB “printing money” to buy bonds but that negative interest rates might be a better way to stimulate inflation. Had the Cypriot central bank governor said such a thing, nobody would have paid much attention. But investors’ ears pricked up when the Bundesbank president said it. Either printing money (quantitative easing) or setting a negative interest rate (where the depositor pays interest to the bank) would weaken the euro. And that, in the opinion of investors, is what some members of the ECB Governing Council are angling for.
There is therefore a great deal of interest in the coming week’s Governing Council meeting. Will the ECB announce some form of quantitative easing? Will it decide to charge interest on the deposits it receives from the region’s commercial banks? And if chooses neither of those routes on Thursday, will it hint at such a move in the future?
Even after the recent comments there is still no general assumption that the ECB will do any of those things in the coming week but the chances are higher now than they were. That is why the euro has fallen from favour during the last week and why it could become even less popular if the Governing Council does bite the bullet on Thursday.
For more information about these and the other options that are available to help send money to and from France as efficiently as possible call the experienced and friendly team at Moneycorp. You can call straight through to the trading floor on 0044 20 7589 3000 and quote “Sextant” to benefit from great rates and first transfer free (usually £15 over the phone and £9 online).
Call +44 (0) 20 7589 3000 (Open 7:30am – 9pm Monday 9am to 1pm Saturday to Friday UK Time)
Moneycorp are Sextant French Properties preferred currency partner and have been selected due to their great rates, great service and great solutions. These are some of the reasons they have transacted over two billion pounds for their clients.
Moneycorp has been in the business of moving money between countries and currencies for over 30 years and offers money-saving foreign exchange to customers ranging from blue-chip businesses to private individuals. We make money transfers simple and help you to manage foreign exchange rate movements.
Moneycorp also offer a number of different contract options for Sextant clients including a forward contract where you can fix a rate of exchange for a period in the future using just a small deposit, perfect to help take the risk out of the currency markets and budget for your French property purchase.