As we head towards the Italian election on Sunday, what might this week have in store for Euro exchange rates? Will the Euro suffer when politics takes centre stage? In the table below you can find high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 to Euros during the last month.
|Currency Pair||% Change||Difference on £200,000|
So far markets have been ignoring the Italian election which is due on Sunday.
The Italian stock market has actually been rising in 2018, in part down to bargain hunters buying up discounted Italian banking stocks and because Italian economic growth was 0.7% higher in 2017 versus 2016.
Whilst individually the parties on offer are cause for concern, the likelihood is no one party will obtain a majority and we will have a coalition. This will make it difficult for any one party to dramatically alter the direction and status of Italian politics, and therefore the Euro.
If no party wins a majority in the Italian election the Euro could be impacted.
Leading the polls is the centre right coalition which includes former Prime Minister Berlusconi’s party, Forza Italia. He cannot govern Italy since he is banned from public office, but his influence and support is crucial. There are various far-right anti-EU, anti-immigrant and anti-globalisation elements within this group, principally the Northern League and Brothers of Italy parties.
Any signs of these far-right parties or the more left leaning 5-star movement gaining greater shares of power could destabilise the Euro.
Whilst tempting to hang on and wait for Euro weakness following the election, this might end up disappointing. The likelihood is perhaps a more volatile Euro operating in the recent ranges it has occupied. Clients both buying and selling Euros might wish to be making plans today and this week ahead of the vote to try and maximise their Euro position.
There is also key economic data this week to act as a driver for the Euro, kicking things off today is ECB (European Central Bank) President Mario Draghi, speaking before the European Parliament.
Draghi might hint at the long-awaited shifts in policy regarding changes to the current QE (Quantitative Easing) program or interest rates. The Euro will be responsive to any shifts in Draghi’s tone, this speech is at 2pm UK time today.
Wednesday is the latest Consumer Price Index Inflation data at 10 am, with Unemployment on Thursday at 10 am and other ECB speakers peppering the week too.
The key focus will however be Politics and the Italian election due on Sunday, the result should be known one week today. If the result is too mixed there could be lots of time spent negotiating and even the possibility of a second election to finalise a more manageable outcome.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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