Week in FX Europe – BoE and ECB Forward Guidance Drive EUR Down

Dovish remarks from the European Central Bank and the Bank of England drove their respective currencies down versus the dollar. The EUR/USD is trading below the 1.29 line. The pair started the decline after ECB President Mario Draghi maintained interest rates at 0.50% for the Eurozone. He issued a pledge to keep rates low for a long as was needed. The market had been jolted earlier in the week as the political situation in Portugal continues to deteriorate. The US Non-farm payroll figures beat expectations which boosted the USD versus the EUR and GBP while also getting in line with Fed guidelines that could signal the end of QE in the US.

The GBP/USD has touched below 1.49 only to slightly recover during Friday’s session. A tough week for incoming Bank of England Governor Mark Carney but one he navigated wisely. Economic indicators in the UK for the most part were positive. He will no doubt introduce more transparent forward guidance communication mechanisms, but so far a new statement from the BoE is a good start. In two weeks the breakdown of the vote will be public and we will know which side he supported in his first week in the job.

Social unrest in Turkey continues as the courts have dealt the Turkish President a defeat. The park dispute that started the protest avalanche has been settled in favour of the protestors. It will be interesting to see how much political damage the decision has caused. Turkey, Greece, Portugal and Spain continue to be on the radar for protests as the wounds of austerity continue to bleed.

• Swiss Foreign Currency Reserves Fall 2 Percent in June
• German Factory Orders Fall 1.3 Percent in May
• European Council Declares Spanish Banks Need no Aid
• ECB and BOE Seek Independence From Fed’s Plans
• More Easing Expected from BOE and ECB – Goldman
• ECB Warns Rate to Remain Low for Extended Period
• ECB Rate Stament more Damaging to EUR than Portugal
• Park Project that Ignited Turkish Protests Cancelled by Courts
• Greece Finance Minister Shares Deadline Failure with Troika
• UK New Car Sales Grow 13 Percent in June
• BoE Releases Statement on Rates Hurts GBP
• Portuguese Yields Recover as PM Rebuilds Cabinet
• Oil Remains Over $100 After Egypt Coup
• Euro Near 1-Month Low Just Below 1.30 Before ECB Meeting
• Portugal Political Crisis Increases Borrowing Costs
• Use of the Euro Declines Due to Crisis
• UK Construction Sector Grows in June
• UK Manufacturing Reaches 2 Year High
• Spain Records Strong Manufacturing Reading in June
• Portugal Finance Minister Quits
• UK Business Confidence Reaches Six Year High
• Greek Rescue Bank CEO Resigns
• Bank of England to Reduce Bank’s Exposure

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