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.


* CNY Consumer Price Index
* GBP NIESR Gross Domestic Product Estimate
* CNY New Yuan Loans
* USD Fed Releases Minutes from Jun 18-19 FOMC Meeting
* JPY Bank of Japan Monetary Policy Statement
* JPY Bank of Japan Rate Decision
* AUD Employment Change
* EUR ECB Publishes Monthly Report
* JPY Bank of Japan’s Monthly Economic Report for July
* USD U. of Michigan Confidence

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza