In­vestors pick euro as their ‘safe haven’

Lee Chap­pell, Cor­po­rate FX Dealer at Cur­ren­cies Di­rect, throws the spotlight on this month’s global fi­nan­cial trends

Living France - - Property News -

The dust has set­tled in Greece for now, giv­ing the Euro­pean Cen­tral Bank (ECB) and its boss, Mario Draghi, time to think about how to re­solve the down­ward pres­sure on eu­ro­zone in­fla­tion.

In­vestors who want a ‘safe haven’ cur­rency are busily mov­ing to the euro in re­sponse to the ex­pected in­ter­est rate rise in the US (due this month) and global fears over China’s eco­nomic melt­down, which have made the US dol­lar look less at­trac­tive than usual.

This euro buy-up has caused in­fla­tion to stall, which should mean that it is about to de­cline slightly. The ECB has once again been forced to pon­der whether it ought to ex­tend its quan­ti­ta­tive eas­ing (i.e. bond pur­chas­ing) pro­gramme, which is sched­uled to end in Septem­ber 2016.

In Mr Draghi’s latest speech, he sug­gested that the pro­gramme could be ex­tended if the eu­ro­zone’s econ­omy as a whole isn’t show­ing enough growth. The ECB wants in­fla­tion to hover close to 2%, but in­fla­tion is ex­pected to de­cline into neg­a­tive ter­ri­tory in the lead up to 2016.

On 3 Septem­ber, the ECB de­cided to keep rates on hold for at least another month, which was no sur­prise to the mar­kets. With so much un­cer­tainty still sur­round­ing a num­ber of is­sues in the EU, in­vestors would be as­ton­ished if the rates were moved be­fore the turn of the year.

With the euro look­ing a bit sickly against its ma­jor coun­ter­parts in re­cent months, the ex­port in­dus­try is thriv­ing as for­eign busi­nesses pour money into lo­cal trades by buy­ing goods at a ‘cheaper’ rate of ex­change.

If you’re look­ing to move money in or out of the eu­ro­zone, it’s a good idea to talk to a cur­rency spe­cial­ist be­fore act­ing at a mo­ment that could cost you a lot of money. One of our friendly ex­perts will be happy to help you nav­i­gate the ever-chang­ing for­eign ex­change mar­kets. www.cur­ren­cies­di­rect.com

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