The Composite Purchasing Managers Index from Markit this week shows the Eurozone is yet to see any major fallout from the Brexit decision. The surveys of both the manufacturing and services sector indicated that the slowdown the UK has faced is not prevalent in the Eurozone. Most importantly for the Euro is positive key data should mean the European Central bank will not have to stimulate the economy using further fiscal strategies.
Mario Draghi is already backed into a difficult spot with interest rates at 0% and quantitative easing being pumped into the economy at €80bn a month.
One concern for the Eurozone will be the difference in speed that individual countries are performing. Unsurprisingly Germany is leading the route to recovery, whilst Frances PMI showed small amounts of growth, alternatively Spain’s composite PMI fell to a 32 month low.
The major question this leaves is how the Central Bank introduces a monetary policy that is able to accommodate for a fast growing Germany, whilst introducing measures to help struggling economies return to growth.
On this day last year the GBP/EUR rate was at 1.41 only a few cents of a 8 year high. Last year’s high rates were attributed to the debt crisis in Greece where a bailout package was put together in the 11th hour to save the economy. Fast forward a year with extra bailout funds secured and a second economy in Italy on the cusp of crisis can the Euro keep this strength. The Brexit decision has of course created nervousness in Sterling, but in the next year it seems unlikely that the rates will stay low.
If you are planning to complete currency transactions in the medium to long term being in contact with a broker can allow you to set market orders. If you have worked out sums based on certain levels, placing orders in the market means you know if the rate you want is reached your currency will be bought.
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