It’s been another sobering week for EUR, which has seen its value decrease against both GBP and the USD.
GBP/EUR rates hit a low of 1.1509 yesterday and despite the single currency finding some support around the 1.15 threshold, it is now trading close to a three-month low against the Pound.
EUR/USD also fell back towards 1.13 during Thursday’s trading, with the greenback still finding support despite the on-going Government shutdown, which has now entered its 34th day.
|Currency Pair||% Change in 1 month||Difference on £200,000|
Those clients holding EUR have been left scratching their heads, asking themselves how they could possibly have seen a decrease in value when both the UK & US economies face such unique difficulties at present.
Looking at GBP/EUR and the recent downturn for the single currency is particularly poignant in my opinion. The loss has been attributed to an upturn in investor confidence in the Pound, relating to the fact that it seems as though both the UK and EUR wish to avoid a no-deal Brexit scenario. Despite this renewed optimism there is still no deal agreed and with the deadline for the UK’s exit fast approaching, have the markets once again jumped the gun, or are the Euro's best days now behind it?
The truth probably lies somewhere in the middle but it not just the unpredictable Brexit sentiment that is driving the value of EUR down.
Despite reports that the European Central Bank (ECB) are likely to raise interest rates this year, possibly on more than one occasion, at present the Eurozone economy is suffering due to political and economic upheaval in three of its key economies. Germany, France & Italy find themselves fighting against a contracting economy and a raft of political uprisings against the so called establishment.
Add to this the fact the ECB have now wound up their bond buying programme, and the Euro looks more fragile than it has done in the past two years.
The current trade restrictions the US have instigated against various Eurozone exports are also causing an economic slowdown across the region.
Personally, I feel as though the EUR is unlikely to make any serious inroads back towards 1.10 against the Pound, unless the UK ends up leaving the EU without a deal.
Despite the losses, Euro sellers may wish to take a longer-term stance and that is that the current prices remain extremely attractive, when you consider the history on GBP/EUR. They must also consider that any forward momentum with Brexit talks, and a ultimately a deal, will likely relieve investors' anxieties and the EUR could face further losses.
Due to it being close to month end, economic data for the Eurozone is fairly sparse. Yesterday morning’s Manufacturing & Services PMI data made for grim reading, with both figures coming out below the markets predicted result at 50.5 & 50.8, respectively. These falling figures are getting uncomfortably close to the 50 threshold, which indicates either growth or contraction.
In other news the ECB kept interest rates on hold at 0% as anticipated.
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