Daniel Wright
Sales Director
Euro weakens, as Brexit deal signed
The euro has weakened against the pound as the Brexit deal signing supports sterling whilst poor eurozone economic data weighs on the single currency.
Request a quoteSterling touched a multi-month high versus the euro this week, in part because the UK and the EU at last signed a Brexit deal. However, another factor that’s contributed to the pound’s strength versus the common currency is the euro bloc’s continuing economic weakness, especially in Germany.
Looking ahead, the International Monetary Fund (IMF) has cut its economic growth outlook for the Germany in 2019/20, while incoming European Central Bank (ECB) President, Christine Lagarde, may further ease monetary policy, to prop up the bloc.
Eurozone price pressures at 0.8%, well below target
This week we learnt that Eurozone inflation fell by -0.2% to 0.8% in September, according to Eurostat. This was well below the ECB’s official target of close-to-but-below 2.0%. This is a three-year low in Eurozone price pressures, which tells us that the euro bloc remains too weak to generate consistently higher prices, like the central bank aims for.
As a result, it’s quite possible that Mrs. Lagarde, who’ll replace outgoing ECB President Mario Draghi, will try to cut interest rates further below their current 0.0%, and expand the ECB’s Quantitative Easing (QE) beyond its €30 billion a month.
The ECB’s German representative, Sabine Lautenschlaeger has already quit her post over the Central Bank’s decision to ease monetary policy further last month. So, more interest rate cuts would be quite controversial.
German investor confidence stays low, EZ exports fall
Elsewhere, it’s worth noting that German investor confidence fell less than forecast in October, according to trusted economics watchdog ZEW this week, though it’s still close to nine-year lows. To be specific, ZEW’s German economic sentiment this month fell by -0.3, to -22.8. This is well above market forecasts for -27.0, yet still the worst result since 2010.
According to ZEW’s President Achim Wambach, “The recent settlement in the trade dispute between the USA and China does not seem to diminish economic scepticism at this stage.”
Germany’s Gross Domestic Product (GDP) growth is now forecast at just 0.5% in 2019, while it’s quite possible that the Eurozone powerhouse will enter recession too. In addition, exports in the wider Eurozone fell by -2.2% in August year-on-year, which may weaken the bloc’s GDP outlook.
Expect volatility on sterling exchange rates ahead of the key Brexit vote in UK parliament tomorrow, you may wish to get in touch with you account manager if you have an upcoming currency transfer.
Read our monthly currency forecast
Download hereNews
D. Henshall
UK
Top currency broker. Fantastic Daniel Wright was really helpful. I have now changed my currency broker I have been with for 10 years to yourselves.
S. Storer
UK
The whole process was simple by Daniel Wright. He described the various stages to the process very clearly & was always available to talk to. A very knowledgeable & friendly person! I highly recommend Foreign Currency Direct.
M. Raeburn
UK
Superb none better. Impeccable service. So so efficient. Absolutely delighted with the way this company works and especially Daniel.
M. Smith
UK
Would always recommend them. They have their fingers on the pulse and could not be more helpful. Have dealt with Daniel Wright every time who is polite, patient and charming.
M. Bickerton
Spain
We spoke with Daniel for only a few minutes and the funds were in our Spanish Bank Account later that day at the best exchange rate one could get on the day. We would never use anyone else to transfer our funds abroad.