The UK's decision to leave the EU continues to dominate the media whilst problems in Europe are overlooked. Keep track of GBPEUR exchange rates here.
In the midst of the economic and political pressure facing the British economy the banking issues across Europe appear to have been overlooked by the mainstream media. The Brexit has momentarily caused fear for investors and bankers but one big problem is potentially lurking round the corner. The Italian banks are under pressure at the moment and the total amount that international banks have lent to Italy is €550bn. As part of the total exposure French banks are indebted to the tune of €250bn to Italy with the UK at just €29.7bn.
According to the latest statistics 17% of the banks’ balance sheets are ‘non-performing’ which means they are unlikely to be able to pay off in full. Indeed, the next date for concern is 29th July which is when Europe’s latest stress tests will be announced. The International Monetary Fund has warned that Italy may not return to the same levels of growth seen prior to the credit crunch until 2025.
The next large debt repayment due to be made by Greece is due on 20th July with a repayment amount of €1.44bn owed to the European Central Bank after they defaulted in 2012. So far the Greeks have been able to make all their recent payments but this is one of the largest ones in recent times. Since the Brexit vote all European banks have seen their share price fall in value and we could see the Greeks struggle next week if there are signs that Greece may miss this repayment.
On Friday of this week the Eurozone announces both Trade Balance and Inflation data for June. The expectation for the Eurozone is for 0.1% year on year so anything less could cause Euro weakness.
Overall GBPEUR rates are being affected by the economic uncertainty caused by the recent EU referendum and until we have a clear path of how the country will move forward Sterling is likely to remain under pressure against the single currency.
Most of the changes to GBPEUR exchange rates will continue to be driven by Brexit related news. Get in touch with your broker today if you are concerned about further losses to your currency requirement on 01494 725 353.
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