Draghi’s QE announcment causes volatility on GBP/EUR (Daniel Johnson)
QE statement causes big swings on GBP/EUR
This afternoon we saw Draghi address the situation on Quantitative Easing (QE). QE is essentially printing money and then injecting it into an economy in order to stimulate growth. One of the major concerns for the European Central Bank (ECB) is deflation in the Eurozone. Inflation levels are currently teetering on the brink of deflation and QE has not had the desired affect. The program was due to end in March, which had €60bn going into the struggling Eurozone every month. Not to continue QE had the possibility to cause disaster in the bloc.
Draghi as expected, lengthened the current program to December, but drew the line at increasing monthly increments. It caused GBP/EUR to be up and down like a cork in a bath tub. GBP/EUR currently sits in the 1.18s. With so much uncertainty regarding Brexit, if I was selling Sterling short term I would not set my trade target much more than 1.19.
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