Will the Euro Weaken?

The Eurozone following Brexit has so far largely come out unscathed. Whilst the European stock markets took a dive following the UK referendum the spotlight has firmly been held over Britain as one would expect. This is however likely to change at some point in the not too distant future. The European bank stress tests highlighted Italian banks as having some major financial problems with particular reference to Monti dei Paschi, the world’s oldest bank.

Meanwhile Greece continues to struggle and continues to accept further bail outs. Even now this still sounds just as familiar as the period following the financial crisis of 2008.

Greece are also looking to pursue a legal claim against Germany with regards to compensation payments linked to Nazi occupation during WW2. A report from Greece argues for €269 billion in reparations to be paid and this will go to the Greek parliament in September to be voted on. Most importantly though the political elections for Germany, France as well as the Italian referendum in October of this year in these troubled political times could result in a number of unforeseen outcomes and hence major volatility for the Euro. The recent implications in politics for the UK have seen so many heads roll including a well-regarded Prime Minister. The Eurozone look like they may have a taste of this to come.

There are a number of important data releases from the Eurozone which should create some market volatility. EU Consumer Price Index (CPI) inflation numbers for July are expected to hold steady although any increase would be welcome news for the Euro. A strong CPI number this morning could see the Euro strengthen. The European Central Bank Monetary Policy Meeting Accounts also released this morning may give some clues as to what the ECB are monitoring and what action may be taken.

Markets remain volatile since the EU referendum and those waiting on a currency exchange may find it useful to speak with our brokers on 01494 725 353.


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