Terrorist attacks continue to dominate the media in recent weeks, Germany are the now the latest victim. Draghi has sworn to protect the Eurozone at all costs, Friday's inflationary figures may put his leadership to the test once again.

Munich Shooting

For the second week in a row Europe has been the victim of a terrorist attack, this time in Munich. A total of nine people have been killed and injured many more. Geo-political tensions are rising and the continent is on high alert.

Will the European Bank Stress Tests cause problems for the Euro?

The Euro has continued to remain strong against the Pound and European Central Bank Mario Draghi has recently suggested that the Eurozone has managed to weather the storm of the Brexit and it has not been as bad as could be expected.

The ECB has confirmed that they will do whatever it takes to support the Euro in order to boost both growth and inflation and Friday night’s stress tests could cause huge volatility.

On 29th July at 9pm the latest results will be announced and I am personally suspicious as whenever influential data is released outside of working hour this is usually because the data could produce a huge amount of volatility.

The European Banking Authority will examine a total of 51 banks with a minimum of €30bn in assets which represents approximately 70% of total EU bank assets. Previously when the tests have been done it was 123 banks that were specifically tested. The scenario was designed by the European Systems Risk Board and will use recession-like conditions and slow growth in the test. Currently the ones expected to come under the most pressure are the Italian banks which have €550bn worth of exposure of which almost half is owed to the French banks. Therefore, if the results come out showing big concerns we could see a very quick reversal of fortune for the single currency vs Sterling.

Other data releases for the Eurozone include German unemployment data as well as Consumer & Industrial Confidence for July and we end the week with Eurozone GDP data on Friday morning as well as Eurozone Inflation. Both GDP and inflation will be crucial in determining what will happen to the strength of the Euro and I think coupled with a negative stress test report we could see Sterling strength towards the end of the week.

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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