Important Eurozone data is released on Monday in the form of Inflation data at 10 am. Inflation is important for the Eurozone because the ECB (European Central Bank) have made it part of their economic policy to launch remedies to combat ‘deflation’, that is falling prices. The ECB have been using QE (Quantitative Easing) to boost growth and economic activity. QE is known as printing money and generally weakens the currency involved.
Market participants will be looking at Monday’s data which could well set the pace on Euro rates for the early part of the week. Thursday is the next ECB Interest Rate decision which will be closely watched by investors as to any shifts in policy. At the moment the current QE program is due to stop in March 2017, the prospect of this being extended or ‘tapered’ could drive Euro rates.
If you are buying Euros with pounds hoping for a higher level then next week’s news could provide that opportunity. With sterling seemingly in freefall lately and acting more like an Emerging Market currency than the strong lynchpin of the global economy, investors are understandably nervous. I described recently predictions by various major banks at between 1.08 and 1.20 for year end and early 2017. Well in the 2 weeks since my last report a quick scan of the various alerts I am sent from my sources reflects the big change in sentiment on GBP/EUR. The current range for the coming months on GBP/EUR looks like 1.12 down to 0.95 cents. What was unthinkable only a few weeks ago could soon be reality, rates below 1 Euro per pound are reality for anyone buying holiday cash at airports lately.
These predictions must be taken with a pinch of salt, last year a very well-known bank were predicting GBPEUR would hit 1.50 this year. It has been said the only way to predict the future is to create it and that is why being in touch with your account manager here is critical to understanding the market. On balance it looks like the pound will err on the weaker side, clients looking to buy Euros should be prepared to trade on any spikes to help maximise the most in this situation.
Of course Euro sellers must not be too complacent, the recent troubles with Deutsche Bank remind us all economic uncertainty is not confined to this side of the Channel. Euro sellers for pounds are in a fantastic position that should be treated with caution. Get in touch with us today if you have a Euro buying or selling requirement and would like to know more on how current events could impact your needs. Our trading floor number is 01494 725 353.
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