This Euro report will examine the factors that could affect exchange rates this week in order to help you stay informed if you need to make a currency transfer. The table below shows the difference you would have received when buying £200,000 at the high compared to the low for the past 7 days.
|Currency Pair||% Change||Difference on £200,000|
The euro took two heavy blows at the end of last week as the ECB's updated monetary policy release on Thursday and Catalonia's committed vote for independence forced investors to question all the faith they have put into the single currency since the start of 2017.
It is ironic that out of the 3 major pivot points Euro buyers have been holding out for French and German elections being the other 2), it is the Catalonia Crisis that could now shake the foundations of EU unity and economic stability.
As expected, the Spanish Government has withdrawn all power from the Catalonian government to push ahead with their dreams of a republic any time in the immediate future. The book is far from closed however. As a result of the pressures from Catalonia, PM Rajoy has been forced into calling a surprise snap election set for the 21st of December, to which Carles de Puigdement, head of the Catalonian nationalist movement, has been invited to present.
Catalonian nationalists will know they will not win independence simply by going to the polls. But the region provides nearly 20% of Spain's GDP. Barcelona alone attracts 18 million tourists a year with a huge amount of EU trade running through its port acting as the gate way for Spain's major corporations operate competitively within the single block. To what degree lawmakers and locals might disrupt this I am not sure, but it is fair to say the Euro will be due a fair amount of volatility. Clearly the markets are fearful, the Euro lost 0.6% on Friday afternoon. Buying sterling with 200,000 EUR would have seen you with £1,000 less. Euro holders be warned.
Socially, it is evidently quite a decisive period for the EU. Economically, I would be very fearful of the lack of commitment shown from the European central bank, particularly after last Thursday. By stretching their asset purchasing program over time effectively pushing back any chance of improving returns on investment for euro holders for the foreseeable future, you could be forgiven for thinking the markets could become disinterested by the single currency.
My personal opinion however is that Spain will eventually take control of the Catalonian crisis, hopefully without force, with the backing of the EU. There were after all hundreds of thousands of Spanish pro unionists that flooded the streets yesterday afternoon. Over the weekend, European figurehead Donald Tusk also made it clear the EU would not recognise an independent Catalonia, stating Spain will be Europe's « only interlocutor ». As tensions intensify, I expect similar shows of support to help pacify the situation.
In terms of economic data, the long term trend continues to reflect positively on the EU. I expect this week’s inflation and growth figures due out across the euro zone to be no different. As such, if you are looking to buy Euros with pounds, it may pay to capitalise on all the social unrest over the weekend before investors begin to take interest in the single currency once more. There is every chance the ECB could re-evaluate their monetary policy in early 2018.
Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries on 01494 725 353 or email me here.
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