GBPEUR rates remain close to the best levels to buy the single currency for 2 years with the pound. This has been as a result of sterling gains on speculation on Brexit progress but has equally be as a result of a weakness generated within Europe and I personally don’t expect that to change in the near term. 

Currency Pair% Change in 1 monthDifference on £200,000
GBPEUR3.4%€8,000

Political horizon uncertain in Europe

Italy is technically in a recession and Germany narrowly avoided one at the end of last year. Worries about future tariffs between Europe and the US have been put on pause for some time though, which is good news.  Budget problems still exist across Europe too with Italy and Brussels not in agreement as well as the Spanish budget being unconfirmed. The last Spanish budget was rejected and resulted in a snap election which is scheduled to take place in April. Inside Germany political turmoil is still in place as Angela Merkel, who resigned from controlling the leading Government party in December, still suggests that she wants to remain as Chancellor going forward, even though she herself said that the two roles go hand in hand. Politically there is still a lot of moving parts within the EU resulting in less of a unified front image being portrayed.

ECB restarts QE, its unconventional easing scheme

All eyes on thursday's ECB update for the euro

Economic data is this week’s focus rather than political as we have a host of economic data being released as we start the month of March. Yesterday there was good news as Production Price Index beat expectation. Today we have Service Price Index which could well follow yesterday’s trend. Retail figures are also released tomorrow afternoon and expected to show an expansion.

However, Thursday is the biggest day for the EU this week with GDP figures being released along with the latest from the European Central Bank (ECB).  As key members within the block are near neutral growth levels, and with two negative periods needing to be seen in a row to result in a recession, all eyes are on these releases.

Most expect the ECB to be more downbeat about the bloc’s prospects, but most don’t expect them to suggest that a recession is coming.  Inflation and growth forecasts are expected to be revised down which normally has a negative impact on the currency in question. As a result, EUR buyers may decide to wait until the end of the week for better levels whereby euro sellers may want to move sooner rather than later to avoid a lower trading level.

Long term forecasts from the ECB are expected to be light and fluffy at best. The current head of the ECB, Mario Draghi, ends his term at the bank in October and as of yet no real replacement has been suggested so I don’t expect any long-term policy changes to be announced.

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