The euro has reached a near year high against the pounds value this week. This has been more on sterling weakness rather than euro strength, however that is not to say that European economic health is flourishing.

Currency Pair% Change (Month)Difference on £200,000
GBPEUR2.4%€5,400

European Central Bank warns of change in September

Mario Draghi, the head of the European Central Bank (ECB) said last week that the bank would look at a number of different policies if the slowdown seen in parts of the bloc's economy starts to spread. These concerns have been mounting and came from within Germany which has had a period of slowdown not seen for some time.  In last week’s meeting the ECB decided against implementing any change to their policies however spoke more about them giving the market a clear expectation that they may well be implemented in the future.  These tools include, but are not limited to, restarting the QE (Quantitative Easing) program in the Eurozone which was officially stopped last year, or changing the interest rate across the Eurozone.  Both of which could well be seen as a negative event on the economy and therefore caused movement for the euro last week on this news.

This forward guidance has resulted in the expectations of a rate cut at their next meeting in September, which is equally Mario Draghi's last meeting as head of the bank.  ING's Bert Colijn expects both “Interest rate cuts and more QE."  Historically both of these have been seen as negative for the euro making it more expensive to sell and cheaper to buy. It is going to be interesting to see which out of Brexit updates or ECB updates will drive the market next.

Investor confidence in the Eurozone grows

European GDP next for Euro holders

Last week German manufacturing data was released and showed a sharp decline in activity. Separately the IFO survey, which reports on business sentiment through a survey, that sentiment in the business is at its weakest in nine years.

There is a number of economic releases this week as we start the next monthly cycle of data. European business confidence is released today, Gross Domestic Product (GDP) and Unemployment tomorrow, PMI data for manufacturing on Thursday and Retail figures on Friday.  Wednesday's GDP figures have in the past shown the most upset and moved the value of the euro as a result.

If you would like more information on market condition, you may wish to get in contact with your dedicated trader here on 01494-725353.

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