European Central Bank President Mario Draghi is due to speak tomorrow, inflation is expected to be the main topic. Markets will be looking out for indications about further monetary policy in the EU, any new information regarding QE is likely to affect the Euro. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points during the last week.

Currency Pair% ChangeDifference on £200,000
GBPEUR2.66%€6020

Draghi Speech to close the week tomorrow

The President of the European Central Bank will speak tomorrow with the latest inflation concerns likely to be the main topic. The Eurozone following one of the best economic years on record for growth in 2017 has struggled throughout the start of 2018.

There has been a decrease in both consumer confidence and growth figures over the last few months, which at the moment looks like it may continue.

Monetary Policy and Interest Rates    

Mario Draghi in his last few speeches has always eluded to the quantitative easing policy which sees the ECB inject €30bn into the economy each month. This is a reduction from recent levels which were double this amount, but if you think back to this time last year Draghi suggested the QE program would be finished by now.

Mario Draghi Speech to close the week tomorrow

This is clearly now not going to be the case for a considerable amount of time, with the current reduction already arguably having an effect on the economy indicated by the recent fall in inflation.

Reuters news agency yesterday released the results of a survey that markets believe there is a 75% of a 0.1% rate hike taking place in Europe before June 2019. Whilst that’s a considerable time away to be forecasting in the world of currency, the fact it is that far doesn’t spell there is too much optimism for the Eurozone’s performance in the near future.

Against the US Dollar the Euro has struggled much like Sterling in the last few weeks and in my opinion the Eurozone concerns may outweigh sterling’s in the near future.

Northern European Economies Creating Divide

The countries to the North of the EU are beginning to form a coalition of sorts that could create a rift between them and some of the weaker economies to the South.

French Prime Minister Emmanuel Macron earlier this month pointed towards a more focused effort within the EU to help economies in crisis before situations become equivalent to those of Greece a few years ago, with one idea being the pooling of EU members debt.

This has been met with resistance as several member states who are net contributors don’t want to keep bailing out economies. Angela Merkel has clashed with Macron on this point in the past few months and over the coming weeks it may become clearer what the position the German Chancellor will take as Germany’s Parliament begin to discuss their position.

There is expected to be major differences in how the EU should look to prevent any further economic crisis’s, whilst many believe the EU currently wouldn’t survive another crisis.  

The Euro from an investors perspective could be headed down a path of uncertainty which could start to see the value fall towards the second half of 2018. Those hanging on to sell Euros into Sterling in my opinion may soon be desiring the levels currently available as time moves on.

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