As the dust begins to settle, the Euro will become vulnerable to data releases which are in the plenty in the week ahead. Mario Draghi's speech on Wednesday will need to address the recent results and the implications it could have on the EU.
Clients selling Euros to repatriate their funds to the UK have benefited the most from the UK’s vote to leave the EU, with EUR/GBP rates now at their best levels in over 2 ½ years. Since the referendum result on June 24th the Euro has gained by almost 5% against Sterling, meaning that a €200,000 transfer in to GBP would achieve an extra £8,000.
I do believe that we could see further improvements on these figures, with the Bank of England Governor, Mark Carney, hinting last week that the UK could cut interest rates as early as their next policy meeting in the middle of July, but there may be pressure on the Euro in the future, with the potential for the UK’s Brexit leading to a domino effect of other nations looking to leave the EU.
In the Netherlands for example, with far right politicians over there calling for a similar referendum to bring back their ‘sovereignty’ in spite of the uncertainty that has clouded the UK economy over the past week or so.
The week ahead is packed with data releases that could affect the Euro, kicking off with Retail sales figures for May tomorrow morning. These are set to show an increase on April’s figures, and this could be due to the measures brought in earlier this year to help boost consumer spending. If that is the case we could see further gains for the Euro, possibly driving the rate below 1.18 when coupled with Mark Carney’s speech which is also tomorrow morning.
This is followed by a speech from Mario Draghi on Wednesday morning, and I believe he likely touch on the Brexit and highlight the implications this could have on the Eurozone and the measures that they may bring in to protect the economic bloc. His comments have the potential to cause market volatility, so anyone with Euro exposure should keep a close eye on any developments.
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