Could more referendums be on the cards?

This year we will see three general elections in the Eurozone. As a rule, political uncertainty weakens the currency in question. But in this case I think we could see more market reaction than your average election. There is the possibility of far right parties’ gaining power in each election which would be bad news for the Euro. On March 15th the Dutch elections will begin. There is the chance that the People’s Party for Freedom and Democracy, (Partij voor de Vrijheid, PVV) led by Geert Wilder could gain control.

Wilder’s far right stance is well documented and a referendum could well be on the cards should he become elected. The French election is to follow where Marine Le Pen could create a similar scenario.

Later in the year, we have the German election and it is possible Merkel could lose a considerable amount of voters due to her liberal stance on immigration becoming ever more unpopular.

We only have to have a look at the adverse effect a referendum had on Sterling to see the potential effects it could have on the Euro.

Inflation an issue that will not go away for the Eurozone

The Head of the European Central Bank (ECB) Mario Draghi spoke last week after there was no movement in Consumer Price Index (CPI) data. CPI is a barometer for price movements by the comparison between specific retail products and services. It is a key measure of inflation. Draghi dampened optimists by stating the previous month’s positive data does not take pressure off the ECB.

Inflation has been a major problem for the Eurozone and it has been close to deflation on a number of occasions. Quantitative Easing (QE) has been in place for a considerable time and the ECB recently dropped monthly increments from €80bn to €60bn in what I consider to be a bold move. I think there are serious issues regarding inflation within the bloc and it is a problem that is not easily solved. Throwing money at it is not having the desired effect.

If you are a Euro seller it may be wise to take advantage of current levels considering just over a year ago GBP/EUR was above 1.42. If you compare the difference selling Euros to buy Sterling on a €200k transfer you would be looking at a higher return of more than €29500. Speak to one of our knowledgeable brokers on 01494 725 353 if youd like to take advantage of these fantastic selling opportunities.


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