Central Bank comments affect exchange rates
(View live currency graphs here to see how rates have moved over recent weeks and months.)
Euro gains strength after Mario Draghi comments
It started when the ECB President, Mario Draghi, said that they may well start to taper their stimulus programme. At the moment they have zero interest rates and huge Quantitative Easing programme in order to stimulate the economy. His comments suggest that some of this stimulus may be scaled back due to improving economic conditions in Europe. His comments caused the Euro to gain against other currencies, including the Pound, pulling GBP/EUR rates down to €1.13.
The Bank of England governor, Mark Carney, also spoke today, and said that the central bank would be tightening capital controls on banks. In effect this means less consumer lending and with it, less chance of an interest rate hike in the UK. This weakened the Pound against other currencies including the Euro and US Dollar
FED Chair Janet Yellen due to speak at 6pm
After the EU and UK central bank chiefs comments today, this evening at 6pm it is the turn of the US Federal Reserve chair, Janet Yellen. I think she is going to be quite positive about the US economy which may strengthen the USD and bring GBPUSD rates down a little. Today, cable has actually risen slightly due to the inverse relationship between the Euro and Dollar, and as the single currency gained, the Dollar weakened accordingly. We may see a reversal of this move this evening if she is bullish about how the US economy is faring
What could move rates next?
Tomorrow we have another speech by the BoE Governor, another one by the ECB president, and tomorrow we will also see the Bank of Canada's Governor Poloz speak, so again, it's central bankers and their view of their domestic economies that will move currency prices on Wednesday.
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