It was only a matter of time until the Euro felt the brunt of Brexit, although it remains strong against Sterling, it continues to be weaker against the US Dollar. Mario Draghi's speech this morning could give away some clues for the Eurozone's outlook.

Brexit fallout drives Euro exchange rates downwards

European equity markets have struggled since the Brexit vote was announced with Germany’s DAX struggling the most yesterday, down almost 2% along with Spain’s IBEX. As company director James Lovick highlighted yesterday, much of the focus since the 23rd of June has been on the UK, but the Eurozone isn’t going to come out of this unscathed.

I think that the Euros performance versus the dollar recently is a good indicator of this, with the single currency falling over 3 cents in the aftermath of the vote and since then recovering by just a cent.

Italian banking system in trouble

Demand for the Euro has been in short supply since the UK decided to leave the EU, and the Euro hasn’t been helped by the latest news out of Italy. Many actually consider the crisis facing Italian banks to be a greater risk to EU stability than the Brexit. Italy is currently in talks with the European Commission to receive a bailout to prevent a financial crisis, and concerns that the process will take too long have prompted Italian PM, Matteo Renzi to publically consider breaking EU rules by using public funds rather than creditors to resolve their banking crisis.

Mario Draghi’s speech to take centre stage

At 8am this morning, ECB President Mario Draghi will be giving a speech which could influence Euro exchange rates depending on what’s said or alluded to. Then on Thursday, the ECB Monetary Policy Meeting Accounts will take place at 12.30pm UK time, providing the markets with an overview of financial, economic and monetary developments in the EU.

With EUR/GBP overnight hitting a new almost 3 year high of 0.8627 (1.1556 for GBPEUR) as the Pound slipped further and Asian equity markets tumbled, the position of Euro sellers seems to be getting better daily. Contact your broker to be kept up to date with current developments and how best to time your trade on 01494 725 353.


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