Volatile day for GBP/EUR

If you have a short-term Euro requirement, yesterday’s jumps in the currency market would have certainly tested your nerve. The Pound slumped to weekly lows of 1.157 against the single currency before fighting back to highs of 1.171 courtesy of BoE’s senior official Kristin Forbes’ positive vibes about the UK economy. The afternoon session proved just how important it is to be kept up to date with the trends in the market – A well timed transfer offered our well-informed clients an extra 2,800 € on a £200,000 budget.

Disappointing economic data limiting short term Euro strength

Many were surprised to see the single currency’s grip of the Pound slip over the course of the afternoon with most putting the blame on disappointing financial releases coming out of France and Germany, the Eurozones two leading economies.

France’s trade balance reached -48.1 €Bn, well over the 45.3 €bn targeted by the government at the start of last year.

Dominant French bank BNP Paribas’s shares also are down by nearly 4% with end of year results taking a hit. Both are said to result from an increased level of caution from investors limiting the country’s competitivity.

Furthermore, the slowdown of 0.7% of Germany’s industrial output would have done very little to draw investors back to the single currency. I Highly doubt fresh tax fraud allegations over a Deutsche Bank Chief Executive would have helped matters either.

Greek debt is once again at the forefront of variables effecting the Euro with the IMF calling on European creditors to provide significant debt relief to cover Greece’s “explosive” accounts in a bid to protect the rest of the Eurozone’s commitments. The request was previously rejected until the current relief program expires in 2018, the urgency provided by IMF may well send shockwaves around the market and I wouldn’t be surprised to see Euro weakness as a result.

Political instability main driver for long term Euro weakness

As expected, political uncertainty is also beginning to build within the Eurozone as elections in Holland and France are already causing market jitters.

A polling website used by millions of Dutch voters has been put under pressure as a leak suggested it was taking data and manipulating it in favour of a labour party currently sitting 6th in the official opinion polls. This comes following the outbreak of cyber risk concerns surrounding online voting for the US. I wouldn’t be surprised to see this story escalate over the coming days.

Furthermore, Marine Le Pen’s push to win the French presidential elections has gained added momentum as facts into the inquest surrounding her main opponent and originally thought favourite Francois Fillon become apparent.

According to Le Monde, there is now substantial evidence the Republican candidate and front runner paid more than €165,000 net to his wife between 1998 and 2002. This has severely hindered Fillon’s chances with many members from his party asking him to step down before the left miss an opportunity to recover the ground. JP Morgan have predicted a Le Pen win would drive the Euro’s value down by more than 10% against its major currency counterparts.

Although unlikely given the historical trend to vote against the right in France, I would strongly recommend anyone selling Euros in the coming months to get in touch with their account manager who can help you build a plan of action and limit your exposure to the elections and other events in the Eurozone this year. Call our trading floor on 01494 725 353 or email me here and Ill be happy to answer any of your questions.

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