As EUR continues to perform well against GBP and USD, the current signs point to this strength continuing for the time being. The upcoming general election in Italy on March 4th has the potential to affect this strength if the Nationalist Party successfully put another referendum in place to decide on Italy's future in the EU. This and other factors are discussed in today's Euro report; the table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points during the past month.
|Currency Pair||% Change||Difference on £200,000|
Eurozone economic confidence figures released yesterday morning eased slightly from January’s highs. Consumer & Industrial Confidence came out as predicted at 0.1 at 8 respectively but were below last month’s reading.
However, they still remain “historically elevated” and there is no reason to think that the Eurozone economy is heading for any significant downturn any time soon.
The EUR remains one of the currencies of choice for investors at present, holding firm against the Pound despite a slight dip in recent weeks and continuing to perform impressively against the USD.
EUR/USD rates remain close to a 3 year high, despite the US economy propelling itself forward with a run of impressive data, and a positive outlook by the US FED.
The European Central Bank (ECB) and its President Mario Draghi remain upbeat about the Eurozone’s economic productivity levels & growth forecasts. However, as per Draghi’s previous addresses, he remains steadfast in his commitment to their current monetary stimulus programme.
To put it in perspective, the ECB’s current asset purchase programme which has spanned three years has seen the central bank spend 2.55 trillion EUR on government bonds and other financial assets. This is a staggering figure and whilst it seems to have had the desired effect, any economy that requires that level of propping up, will surely carry with it potential pitfalls.
Draghi believes the current (QE) is required in order to support a rise in Eurozone inflation levels. However behind closed doors and maybe more poignantly, he may also be wanting to see what potential negative effects the UK’s upcoming Brexit may have on the Eurozone economy.
This is something they have feared ever since the UK decided to break ties and whilst the potentially devastating outcome is some way off yet, it remains a dark cloud hanging over the EU’s head.
This in itself is something for those clients with EUR currency positions to monitor closely. As of yet this is not an area that the media have focused on but surely due to the UK being the EU’s financial hub, there will be some of negative repercussion should we pull ourselves away in the entirety?
In truth this will likely be part of the current Brexit negotiations but at the very least it must be considered a potential pitfall for those hoping to see the EUR return close to the 8 year highs it was trading at against Sterling only last year.
Another potentially destabilising variable for the Eurozone economy is the upcoming Italian election on March 4th. Given the fact that Italy is one of the Eurozone’s largest and most troubled economies, many in Brussel’s are concerned that any spike in support for the far right Nationalist party could potentially set up another referendum on Italy’s future involvement in the EU.
Any destabilization of the EU and Eurozone economy will likely have a negative impact on the EUR and the current levels could look extremely favourable in the months and years to come.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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