The value of the single currency against the pound is close to the highest level seen in over 6 months. However, against the USD the euro is within a cent of the lowest level seen in over 2 years. This really highlights the fact that it's sterling weakness rather than euro strenght which is leading to these trading levels.
|Currency Pair||% Change (Month)||Difference on £200,000|
Concerns around unemployment remain and even though recent data suggested that overall unemployment fell to 7.5%, it is still much higher than most of the developed world especially when looking at youth employment. Overall economic activity is really the concern, following a slowdown in the engine room of Europe - Germany. The European Central Bank have themselves highlighted the concern and went on to try and calm concerns by stating that they were ready to step in if the slowdown spread into other areas of the economy.
To put this in perspective, Industrial productivity in April fell by 1.9% compared with the previous month, and exports were 0.5% lower than a year earlier. The German Central Bank has also reflected this by contracting their own growth forecasts to just 0.6% for the year, compared with a forecast of 1.6% it made back in December.
As a result of worries about global trade tensions, especially with the US-China talks, plus heightened security concerns in the middle East, there has been a real change in the Central Bank's forecasts over the last 12 months. Last autumn the Federal Reserve (Fed) in the US was pointing towards continuing its three-year campaign of raising interest rates, and the European Central Bank (ECB) had called an end to their own stimulus program. As growth flat-lined both Central Banks have performed a real U-turn. The Fed is now looking to potentially cut interest rates this year and the ECB is now talking to starting their own easing policy again.
The European economy is probably being impacted hardest and this was highlighted again with carmaker Ford confirming that it is cutting 12,000 jobs across Europe, a sign of the difficulties faced by the manufacturing sector within the bloc.
Initial European Retail figures were released yesterday which showed a contraction along with Producer Price index, which continued the trend showing a slower pace than last month. Today there is the Purchasing Manager's Index (PMI) data for several key members including France, Italy, Spain and Germany. On Thursday, we have the overall Retail figures being released which is also expected to show concerns.
Following the European Elections there is a number of key changes taking place at top spots across the European bloc. The replacement of the ECB president is the change which could well be the largest impact on the euro's value and the front runner for the position was confirmed overnight is Christine Lagarde, the current head for the International Monetary Fund (IMF). This is a topic which is one to watch especially in the short-term.
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