Eurozone economic outlook shows resilience to Brexit

The OECD predicted back in June that Brexit could ‘spread shockwaves through the global economy’. We’ve seen no signs of this in the Eurozone or US economy, although it could be too early to tell.

It does appear currently that the Eurozone is performing well since the UK’s vote to leave the EU. Markit PMI releases for a number of economies have not followed the same trend as the UK.

Purely from an observational perspective, the Bank stress tests that were performed last Friday exposed a number of European banks at risk, but did very little to help GBPEUR exchange rates.

If the EU continue to perform well in light of Brexit, I forecast exchange rates far worse than current levels.

Concerns within the EU having little impact on exchange rates

Whilst a number of concerns remain for the EU to tackle, unless economic data takes a shocking turn for the worse I am not expecting exchange rates to move in favour of Sterling.

Investors are gauging whether the impact of Brexit is spilling into the Eurozone. With concerns in Greece and now Italy still in play, Brexit still remains the number one concern.

The Eurozone has been through many times of uncertainty, Greece, Portugal, Ireland and Spain have all fallen victim to bailouts. However, given that no country has left the EU, especially one which is considered a large net contributor, there would appear to be far more at stake.

Pound to Euro exchange rates could fall further this week

As mentioned in my main Sterling report, a handful of economic releases today could put further pressure on exchange rates.

The recent run of negative PMI data could continue with construction and industrial output figures. The NIESR GDP estimates will likely rattle markets given the Bank of England’s decision to cut growth forecasts.

Friday’s Eurozone GDP estimates for Q2 could bring further pain for Sterling. If there is any report this week that could highlight the impact of Brexit on the Eurozone, be sure to tune in at 10am, A positive release could be interpreted as further resilience to the Brexit vote.

Should I buy Euros today?

If you are expecting GBP/EUR exchange rates to improve anytime soon, I cannot personally see this happening until at least next year.

Current exchange rates remain attractive, but are unlikely to remain at these levels for much longer.

The Bank of England’s decision to cut rates could well be the first measures in line to stabilise the British economy. It is expected that Brexit has dented the economy which will be transparent in future economic releases. For every negative economic release going forward is the potential for more action from the Bank of England.

They have already hinted at further measures this year, and given that Brexit hasn’t even begun yet, there is even more reason to buy now rather than later. Our brokers are on standby all day to take your call, we thrive on getting our clients the best exchange rates possible so don’t hesitate.

If you have any questions about todays report, or need to make a transfer, you may want to get in touch with us today on 01494 725 353.


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