It’s been an intriguing start to the month for the single currency as despite a depressing run in domestic economic releases, the Euro has managed to mount quite a charge against the Pound. The currency report below looks into the reasons behind the Euro's strength against Sterling. The table below displays the range of exchange rates for the past 4 days when selling £200,000.00.
|Currency Pair||% Change||Difference on £200,000|
Just last week, mixed international trade data with France’s deficit widening and Germany continuing to post fairly limited export growth could certainly have raised concerns of lasting side effects from the tariff stand-off with the US just a couple of weeks ago.
So far this month we have also seen a drop off in factory orders, a fall in retail sales and incidentally a dent in domestic business confidence. Despite all this, the Euro has still risen by as much as 1.2% against the Pound, reflecting the market’s fickle relationship with Sterling at present.
If it wasn’t for the potential tabling of a concession deal by the EU in Brexit talks at the end of last week, GBPEUR may likely be looking at testing new lows past the 1.11 mark. Instead, GBPEUR is now sitting in the pivotal mid 1.12s and since Friday’s dramatic repricing of Sterling.
I feel it would be unwise to hold out for long term sustainable gains either way.
Of course, the main driver this week will be the continued backlash from the Turkish crisis. The fall in the Lira will have forced the markets to question their underlying faith in the single currency. The scale of business conducted by the EU’s major players in Turkey will represent the risk perceived by investors holding the Euro. As details become clearer we could potentially be looking a serious sell off in the single currency, making it cheaper to buy.
I do wonder if this will bring more scrutiny to the EU’s economic performance as a whole, with the markets trying to gauge the single block's ability to contain the Turkish crisis in the long run.
If tomorrow’s key GDP figures for example follow suit from the poor stream of data we have seen so far this month, and disappoint the markets, we could see further losses for the Euro, making last week’s optimistic drive at the 1.11 mark seem like a distant memory. Those holding the Euro may want to consider their options.
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