The value of the euro has generally been falling this year against a basket of currencies as political and economic uncertainty continues. Brexit news however in the UK has been a larger driver resulting in EUR/GBP interbank levels now reaching the best levels seen in the last 6 months. Generally, with more political uncertainty expected in Westminster the value of the pound could be more volatile, however news within Europe also has the potential to change values very quickly.
|Currency Pair||% Change (Month)||Difference on £200,000|
Only yesterday Mario Draghi, the head of the European Central Bank (ECB), held a press conference. In that he reiterated that the bank was ready to “use all the instruments that are in the toolbox”, trying to support the euro following a widely highlighted concern within the manufacturing sector. The ECB suggested they were ready to step in if this slowdown broadens into other parts of the blocks economy.
Following the European election recently there have been many challenges highlighted across governments in Europe. In Denmark it resulted in a new general election which took place last week were the Social Democratic Party retained their government. The populist Danish People’s (DPP) Party, who saw a huge level in support at the European election but saw a drop-in support in the General elections, but it highlights the challenges felt across Europe.
German politics have had another wobble with another shock resignation. The German government is formed by a coalition between the Christian Democratic Union (CDU) Party and Social Democratic (SPD) Party referred to as the "grand coalition". Germany's grand coalition is increasingly wobbly and was shocked last week when the leader of the SPD party, Andrea Nahles, resigned stating that she no longer had the support needed to lead. German Government is due to rule until 2021 but with resignation it could well trigger an early exit from the SPD to the coalition, forcing Merkel to call a snap election.
The Bundesbank, which is the Central Bank of the Federal Republic of Germany, slashed German growth forecasts for this year to 0.6%, down from 1.6% in December. This was blamed on weak exports and shows again the strain felt across the EU's strongest member. Germany seen my many as the 'engine room' of Europe is a very important part cog to the EU as a while so if political uncertainty was to intensify it could well impact the value of the single currency.
Next on the economic horizon is German Consumer data and European industrial data this morning, and Italian news tomorrow. All are expected to show further concerns which in turn could adversely affect the currency and make the euro cheaper to buy.
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