Euro hits two-year high
There’s no holding the euro back this morning!
The single currency has romped to a fresh two-year high in early trading, as traders anticipate that the European Central Bank will cut its stimulus programme in the next few months.
The euro has jumped to $1.1677 against the US dollar, its strongest position since August 2015.
The euro has also hit an eight-month high against the pound, at 89.77p, making foreign holidays more expensive for Brits.
Yesterday, ECB chief Mario Draghi said his governing council would discuss its bond-purchase scheme in the autumn. That opened up the possibility that it could decide to trim the pace of the programme at September’s meeting.
The ECB is planning to buy €60bn of debt each month with newly created money, up until December 2015. It also voted yesterday to keep interest rates at record lows.
Draghi did insist that the ECB would remain in the market for a long time, pointing out that inflation in the euro area is stubbornly below target.
But that hasn’t stopped the euro surging higher. And Peter Kinsella of Commonwealth Bank of Australia thinks it has further to go.
He told clients:
“It’s an armour-plated rally and it won’t stop.”
“Everything speaks in favour of further euro appreciation — increasing portfolio inflows, changing monetary policy, improved political risks.”
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The agenda: UK public finances in focus
Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business.
The main event today is Britain’s public finances for June.
With consumer spending subdued, and businesses fretting about Brexit, these figures will show how much the UK borrowed to balance the books last month. They should also indicate whether the UK is on track to hit its deficit targets this year.
City economists predict that the public sector net borrowing requirement (excluding the impact of state-owned banks) fell to £4.7bn last month, down from £6.7bn in May.
Last night, consultancy firm Fathom warned that the risks of a UK recession in the next year are now over 50%, so weak public finances might indicate that firms are struggling.
Alternatively, a strong reading would reassure investors.
Last week, the independent Office for Budget Responsibility warned that Britain’s public finances are vulnerable to shocks, as a recession is inevitable sooner or later….
We’re also getting a new inflation report from Canada, and a fresh count of how many oil rigs are pumping away in the US.
The agenda:
- 9.00am BST: ECB publishes survey of professional forecasters
- 9.30am BST: UK public finances for June
- 1:30pm BST: Canada inflation rate for June
- 6pm BST: US Baker Hughes weekly oil rig count
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