Little economic data was released this week causing slight movement on GBP/EUR rates. This theme continues into next week where the only significant data comes in the form of the Harmonised Index of Consumer Prices which is released on Thursday.
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The Index, provided by the Statistical Office of the EU, is an indicator of price stability and inflation within the Bloc. The main task of the European Central Bank (ECB) is to maintain a steady annual figure of less than 2%. With previous figures from the last 3 years floating around 1.8% and previously 1.3%, the Eurozone is expected to hit this target.
However, should this figure exceed the 2% threshold, the increased inflation would raise the cost of living and could cause people to reduce their spending, potentially leading to a weakening of the euro against its major counterparts.
Following ECB President Mario Draghi’s resignation where he leaves the top job on the eve of the Brexit deadline, IMF boss Christine Lagarde has been nominated to succeed the Italian.
Whilst lacking a traditional economics background and no first-hand experience of involvement with monetary policy, it was inevitable that there would be a swarm of criticism facing Lagarde before she takes up her new position. Having previously been accused of “negligence” and a track record of the biggest budget deficit ever recorded, many are debating her ability to manage the responsibilities of Draghi’s footsteps.
With fears that the economic management of the Bloc may be heading for rocky waters, there could potentially be a weakening of the euro in the lead up to and following the handover. Therefore, clients holding euros may wish to get a quick update from your point of contact here at FCD to discuss your situation.
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