Fresh pressure on EUR/USD as QE starts

EUR/USD has come under renewed pressed as the European Central Bank starts its quantitative easing scheme.

Euro and dollar notes
Source: Bloomberg

Euro setting new lows

EUR/USD may well have moved into heavily oversold territory, but the start of the ECB’s QE scheme has triggered weakness for the euro as the bond buying scheme aims to kick the eurozone’s recovery into gear. This scheme is expected to run until the fourth quarter of 2016, but the phraseology that has been used by Mario Draghi has not just hinted but almost stated that this is not necessarily an end date for the scheme.

EUR/USD continues to set new 11-year lows and in the short term is showing no signs of resilience. At the beginning of the year a number of institutions called for EUR/USD parity before the end of the year. At this moment in time both the fundamental and technical outlook point towards that target being hit long before year end.

Spot FX EUR/USD chart

GBP/USD could challenge $1.5000

The bounce that GBP/USD had been enjoying is long gone, and a return to the bearish trend is now well underway. The $1.5000 level has looked like a target for some time and could well be challenged over the coming days. We will hear from the Bank of England’s Mark Carney in the early afternoon, and then Ian McCafferty in the early evening.

As my colleague David Madden has pointed out, Mr McCafferty is regarded as more of a Hawk but will need to come out with some strongly-worded commentary in order to change the path of GBP/USD.

Tomorrow morning’s UK manufacturing and industrial production figures might have more of a chance of changing the currency markets' sentiment. For the time being a retest of $1.5000 looks likely.

Spot FX GBP/USD chart

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