The ECB meeting dominated markets last week. We now turn our attention to the FOMC meeting in the US and the Budget in the UK, alongside the Bank of England minutes. Chances of anything new and exciting coming out from the BoE? About as much chance as the flyball event at Crufts dog show becoming a global phenomenon.

So, turning our attention away from Crufts dog show for a second the ECB president Mario Draghi seemed to play all his aces on Wednesday trying to stave off deflation. Indeed, markets reacted wildly, surging at first then capitulating as it looks like all policy options have been exhausted. So, if another shock comes round the corner then it's hands up time, as there doesn't seem to be much in the arsenal to retaliate. The ECB cut its deposit rate by 10 basis points to -0.4% and stepped up QE from €60 billion to €80 billion Euro's per month. This is all great but the key statement was "We don't anticipate it will be necessary to reduce rates further". Read this as that is as low as Germany wants rates to go and they won't be going any lower. What does all this do for the Euro then? Well, negative rates are designed to help boost inflation and weaken a currency. Now that is seemingly off the table I'd expect a strengthening Euro. At the ECB meeting, the Euro initially weakenened then we had a sharp move higher in the Single Currency. Has the ECB given up on a weaker Euro? Perhaps. That means you'll see EUR/USD pushing higher and in turn you'll see GBP/EUR heading down towards 1.25 the figure over the coming months. If you are a Euro buyer you may want to consider purchasing a percentage of your exposure at current levels. You can offset some of your risk this way whilst allowing yourself room to move in the coming months. Please contact myself or a member of the trading team.

If you look at the graph below you can see the swings on GBP/EUR last week.

I won't bore you all with more commentary on the 'Brexit' as no-one has any real facts and I'm sure you all read newspapers. The only certainty is that the uncertainty is going to weigh on Sterling. What no-one knows is how much that weight will be. To this end, I would take a risk averse approach if you are a Euro buyer and as I highlighted above please do consider covering some of your exposure at current levels as you may have a double whammy of Sterling weakness and Euro strength. If you are a Euro seller then compared with where we've been over the past 12 months I would suggest placing some market orders to the downside. Please contact a member of the trading team to implement orders at the appropriate levels.

So, what of GBP/USD? Well, we have two events out this week in the form of the FOMC in the US and the Budget and BoE meeting in the UK. The Bank of England meeting will be a non event so don't expect much to come out of that. Indeed, it will be about as useful as Scotland beating France for the first time in a decade only to hand the Six Nations to England. With George Osborne fighting a few battles on pension reforms and the small matter of a referendum this budget takes on greater importance. The Chancellor has to keep cutting the deficit although with downward revisions on growth from 2.4% to 2.2% published for this year it may prove harder to do. He can't be seen to give away too much or to upset the apple cart so expect the usual taxes on booze, cigarettes and gambling. We will look through the budget next week and delve into some of the detail.

In the US, it is getting interesting. Will the Fed raise rates and continue the divergence from Europe? On this occasion, no. However, the indicators are looking strong for a rate rise. I would expect the language of risks to change and you will see Janet Yellen giving signals that a rate rise will be on the cards at the next meeting. Indeed, consumer spending has rebounded, the manufacturing sector has stabilised, jobs data continues to improve strengthening the labour market while actual and expected inflation readings are pointing in the right direction. I would expect to see a better improving US Dollar in the coming months. We will have bounces higher as we saw last week although I don't, for now, see much reason to turn bullish on GBP/USD. I think downside risks still remain on Cable so if you are a USD buyer please do consider locking in some of your exposure at current levels. If you are a USD seller please get in touch with the trading team to discuss a strategy for your exposure and to implement market orders.

As always, if you have any questions please do let me know.

Have a great week.

Written by Liam Alexander