Eurozone economy still has questions to answer

The relative strength and weakness of the Euro has generally been linked to the likelihood of the ECB (European Central Bank) extending their QE (Quantitative Easing) programme. QE has been used by the ECB to encourage economic growth and increase employment in the Eurozone. Unemployment data yesterday held steady at 10% and GDP for Q3 was shown to be at 0.3% last week. Interestingly the UK with all its problems still managed growth of 0.2% higher.

Thankfully Inflation has now picked up as earlier in the year markets were very concerned the Eurozone could enter a deflationary trap with falling prices.

Today is Services PMI (Purchasing Managers Index) for the Eurozone at 10 am which could help provide some direction for the Euro as it gives us some indication on the likelihood of more QE to be announced in December.

Pound to Euro forecast – what next?

Pound to Euro exchange rates have risen to a 4-week high as the legal challenge to Brexit gathers some steam, it appears political events outside the Eurozone will continue to be a bug bear for the Euro. The all-important US election is on Tuesday next week and could have wide ranging implications for the Euro. How GBP/EUR will react after the US Election is not overly clear but let me try. What we know is that in times of big swings on EUR/USD and GBP/USD rates we can see the US dollar weighing down on the GBP/EUR rate. Assuming the US dollar rises it will be a question of which currency weakens more in the face of a surging dollar. Will the euro weaken more or will it be the pound?

It has so far appeared the pound has lost to the Euro because of political concerns in the UK. Will the good news sterling is enjoying today last into next week? Nothing is certain on exchange rates so speak to one of our team about all of your options in these historic times. A well timed forward contract can take all the stress and worry away from that important business contract or overseas property deal.

Euro sellers have enjoyed highs since the UKs vote in June but there remains signals that could offset the current trend. Email me here if youd like a more detailed forecast for the Euro.

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