The euro made gains against the pound during the course of yesterday afternoon after yet more negativity surrounding the chances of a No Deal Brexit came to light from Labour Leader Jeremy Corbyn. Corbyn made comments that there was now a very real danger of a No Deal, which was also suggested by Chancellor Philip Hammond during yesterday afternoon.
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However the euro also benefitted from Italian Deputy Prime Minister Matteo Salvini ruling out the possibility of an early election, something which could rattle investor confidence in the euro. After Sunday’s European Election results which saw Salvini’s League Party defeat the anti-establishment 5 Star party, there had been rumours that Salvini may call an election to gain full control over Italy. However instead, he spoke yesterday to confirm that he does not want an election, but instead promised stringent tax cuts and called for changes to budget rules imposed by the EU.
When questioned about the EU’s concerns over budget concerns, he said ‘the economy is showing signs of picking up’, and that tax revenues were higher than expected. The Italian government must provide a letter to the European Commission by Friday to explain the rising debt and budget deficit. Should this letter be approved by the European Commission, it could provide some more positive news for the euro.
Yesterday evening, over 56,000 5 Star members voted on whether Luigi Di Maio should continue as Leader, of which 80% voted in favour of him remaining, after he called for a vote after Sunday’s poor performance in the European Elections. 5 Star had received just 17% of votes, which was over half of the votes its coalition Party League had received.
Factors which could affect euro exchange rates include German Retail Sales figures for April, and German Inflation figures for May which are set to fall sharply from 2.1% to 1.4%. If this is the case, we could see the euro lose ground against its major currency pairings, providing an opportunity for clients looking to purchase euros.
Key releases next week include Inflation figures in the form of Consumer Price Index on Tuesday, along with Unemployment Rate. Thursday will host Q1 European Gross Domestic Product (GDP) figures for the first quarter of 2019, and perhaps most significantly the latest Interest Rate decision from the European Central Bank (ECB).
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