The euro strengthened against a basket of major currencies during yesterday’s trading session, including the pound and US dollar, with the EUR/USD interbank exchange rate rising to its highest level in 3 months.

Currency Pair% Change (Month)Difference on £200,000
GBPEUR2.0%€4,460

Political developments from the UK and US have encouraged investors to move their funds into the euro, viewing it as a safer alternative to the pound and US dollar. Such political developments include talks of a possible vote of no confidence in the UK Government if the new Prime Minister pushes for a no deal Brexit, and the escalating trade war between the US and China heightening ahead of the G20 Summit on Friday.

However the eurozone has some concerns of its own, after the Institute for Economic Research (IFO) Institute published its Business Climate index which showed that German business sentiment fell to its lowest levels since November 2014, another signal that the German economy contracted in the second quarter of this year. The index has now fallen for the third month in a row, although the reading was marginally better than the expectation. 

This morning, the German business confidence survey will also be released and if this follows the same downward trend the euro could potentially come under pressure against its currency pairings.  Business Climate and Consumer Confidence figures for Europe will be released tomorrow and will provide an overview for the entire bloc.

ECB restarts QE, its unconventional easing scheme

Could Inflation figures released on Friday provide suggestion to the ECB’s next move?

On Friday, Inflation figures in the form of Consumer Price Index for June will be released at 10am, and are expected to remain the same as the previous month at 1.2%. Given that the European Central Bank (ECB) has suggested that their next move could be a cut in interest rates, and with Inflation being a key barometer to the health of an economy, it is possible that this release will be eagerly anticipated for signs of a strengthening economy.

Mario Draghi, President of the ECB, spoke last week calling for additional stimulus measures to try and combat weak growth and stagnant inflation.

If this release is positive and beats expectations, we could see the euro make considerable gains, however if it disappoints the euro could fall significantly. Being in touch with your account manager here can allow us to alert you if the rate spikes in your favour.

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