ECB hawkish tones boost euro

A more hawkish outlook than expected by the ECB was the trigger behind a surge in the Euro below 1.22 yesterday afternoon.ECB hawkish tones boost euro    Mario Draghi suggested financing conditions across the single currency area had shown material improvement, which the market interpreted as a signal that the ECB will not cut rates over the next  few months as was the consensus forecast.

Mr Draghi also defended the current austerity measures set in place by euro zone governments, describing them as ‘necessary’.

He also made reference to the ‘two speed’ jobs market – after horrendous youth employment numbers earlier in the week it was vital that he acknowledged the scale of the problem.

Could the ECB follow the Fed’s lead and tie monetary policy to an economic outcome further down the line?

Sterling remains under pressure as we go into the weekend despite the Bank of England refraining from further stimulus at its monthly meeting yesterday.

The bank held off extending the asset purchase program after the funding-for-lending program showed signs of finally easing credit conditions across the UK economy.

But we remain on a precarious path between minimal growth and recession so it is surprising that the Bank does not grab the bull by the horns and attempt to give the economy a much needed boost to avoid slipping into recession once more.

Until we see action from the bank expect the Pound to remain subdued, recent data flow is not pointing to an expanding economy.

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