The euro has dropped to an almost 2-year low against the US dollar this week, demonstrating the weakness the currency is currently facing. Since the Brexit vote, when the pound was trading around 1.30 against the single currency we’ve seen a steep sell-off for the GBPEUR pair, and despite the pair trading just below 1.16 at the moment the long term trend appears to be upward as the euro continues to weaken, which is a result of both a stagnating economy along with a number of well documented political concerns.
|Currency Pair||% Change (Month)||Difference on £200,000|
On Wednesday we found out that morale within German Businesses has dropped through April despite economists expecting to see a slight improvement. The drop is being attributed to fears surrounding trade tensions between the EU and the US. We have seen a similar pattern for the Chinese currency (Renminbi) and Chinese stock markets when trade tensions have surfaced with the US, so it appears that this is a precursor for a weaker currency if the Renminbi and the euro are anything to go by.
German data is watched closely by the markets as it’s the powerhouse of the Eurozone economy, so a drop off in business sentiments or economic data usually results in a weaker euro as we’ve seen this week.
Another matter that’s been weighing the euro down is this weekend’s polarising election in Spain. The country will host its third general election in four years after the President, Pedro Sanchez had his Budget plans rejected by Catalonian Separatist Parties and right wing parties back in February. In the lead up a number of right wing parties have been removed from social media despite large followings, and the election holds the potential to cause further political issues in the country which could have an impact on the euro. This is because there have been two main parties dominating in Spain since the mid 1970’s and now there appears to be five, creating uncertainty.
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