This Euro rate forecast discusses upcoming factors that could affect EUR exchange rates this week and looks at what might happen to Euro exchange rates following a Brexit.
The Euro found some support yesterday as Greece passed key tax and pension reforms which were required to help release the next trance of bailout funds from the EU. The Greek measures are not popular and there were violent protests in Athens leading up to and after the votes. Later in the day there were more positive sentiments from the Eurogroup, the collective term for meetings of Eurozone Finance Ministers.
They suggested progress in talks for debt relief for Athens with further meetings on the 24th May. Concerns over Greek debt have been a big driver on Euro exchange rates since 2009 and any signs that Greece could receive debt relief could mark a turning point in this ongoing affair. The Euro has had a very strong year against the Pound and any improvements here could trigger Euro gains.
This week is fairly important for economic data in the Eurozone with the latest news on Industrial data on Thursday and then Friday Gross Domestic Product (GDP). Expectations are for improvements in the Industrial figures which might further help the Euro.
The market expects no changes in the GDP figure but any changes could impact market sentiment. GDP growth has been sluggish in the Eurozone despite a range of measures to stimulate growth earlier this year including Quantitative Easing (which injects money into the financial system) and an interest rate cut. With the UK economy growing at 0.4% for Q1 but likely to be slowing, this data predicted at 0.6% will more than likely contribute further to the Euro’s firmer position against sterling for 2016.
Much of the commentary surrounding the Brexit focuses on the Pound falling but what about the Euro? Many economic arguments outline a severe devaluing of the Pound as confidence in the UK falls but the political impact of Brexit on the Euro might be just as bad. The Euro is the principal currency of the EU being in use by the majority of members making up the EU.
A vote by Britain to leave may pave the way for other countries to leave raising fresh fears over the sustainability of the EU and the Euro. Of 6000 Europeans polled for the polling firm Ipsos-MORI 45% responded stating they wanted their own vote on EU membership with 48% of Italians, 41% French and 39% Swedes saying they would vote to leave the EU. As of 2015 the EU population is 508 million, so of course the poll is not wholly accurate but no one can doubt the rise of anti EU parties and sentiment in Europe. As always there are never any guarantees on the markets but clearly a vote for Brexit in June will have implications far beyond the UK.
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