Euro Plummets in Forex Markets After Bank Urges Caution

The euro was down in the forex markets as trading got underway on Friday following a warning from the European Central Bank.

The currency managed to remain in the $1.1327 region against the US dollar, but it came perilously close to the $1.1289 point it saw on Thursday – its lowest point for two months.

This came after the European Central Bank (ECB) said that economic growth was likely to be harmed by a range of factors, including the UK’s continued messy withdrawal from the EU as well as problems with the Chinese economy.

As expected, the central bank did not move to shift interest rates when it met yesterday.

The US dollar index, which measures the greenback in relation to several other global currencies, was also down – this time by 0.2%, hitting the 96.41 position.

The winner in yesterday’s forex markets, however, was the British pound. It rose by 0.4% against the US dollar to $1.3114 following the news that Prime Minister Theresa May had managed to secure at least some backing for her Brexit deal from her parliamentary partners the Democratic Unionist Party.

However, there is still no guarantee that the Prime Minister will get a deal through – and she may well have to find even more support from other politicians as well.

Looking ahead to next week, there’s a lot for forex traders to bear in mind.

Monday sees a data release on M3 money supply for Europe in December, which comes out at 9am GMT. This is forecast to show a rise from 3.7% to 3.8%.

At 1.30pm GMT, the Chicago Fed National Activity Index (CFNAI) will be made public by the Federal Reserve Bank of Chicago in the US, and will make some indications of economic activity and performance.

Tuesday will see the National Australia Bank release its Business Confidence survey at 12.30am GMT. This will cover December and is likely to show an immediate view of how the Australian economy is doing.

Later in the day, there will be a consumer confidence data release in the US covering January, which is out at 3pm GMT.

Looking to Wednesday, the Australian consumer price index for the fourth quarter of last year is expected at 12.30am GMT. Year on year, this is predicted to show a drop from 1.9% to 1.7%.

Preliminary European gross domestic product information for the fourth quarter of last year is expected at 6.30am GMT. This is due to show a rise from 0.3% to 0.5%.

British consumer credit information for the month of December will be out at 9.30am GMT. This was last recorded at £0.924 billion.

Given recent concern about the performance of the German economy, it’s possible that the euro will be affected by the preliminary, harmonised German consumer price index release expected at 1pm GMT. This will cover the month of January and was last recorded at 1.7% year on year.

The US Federal Reserve will make its monetary policy decision at 7pm that evening. There will also be a report summarising the opinions of the members of the Bank of Japan out at 11.50pm GMT.