As mentioned in my Sterling paragraph, the Euro made significant inroads against the Pound yesterday whilst it was suspected that Theresa May would face resistance from the House of Lords on the triggering of article 50. This was not so much the strength of the Euro that caused the movement, but more the vulnerability Sterling. Having said that, data from the Eurozone impressed across the board yesterday, particularly in Germany, the powerhouse of the Eurozone, where inflation rose to the highest levels since 2012.
This presents an entirely new issue however, and this dramatic rise in inflation could provide food for thought for the ECB at their monetary policy meeting next week. The current stimulus programme in the ECB of pumping trillions of Euros in Quantitative Easing every month and record low interest rates is causing a stir in Germany and many economists there are pushing for Mario Draghi and co to begin tapering their current levels of monetary easing. With low interest rates and more cash being pumped in to the economy, it will be difficult for Germany to manage consumer spending and therefore keep inflation at manageable levels.
It will be very interesting to see if this is discussed at the meeting next week, but with elections approaching in France and the Netherlands it seems unlikely that the ECB will want to rock the boat. This morning could prove interesting with inflation figures for February across the whole of the Eurozone. If the increase we saw from Germany translates in to the whole of the economic area we could see some further strength for the Euro today and another talking point for the ECB next week.
French presidential candidate Francois Fillon addressed the French public on Wednesday and vowed not to pull out of the running to be the next President, despite confirming that he is facing charges over the allegations of him paying his wife for ‘fake jobs’. The first round of elections in France kicks off next month, with the top two candidates going head-to-head in round two. As we have seen in recent years with the UK and US elections, they have the propensity to cause volatile swings in currency value, so it is crucial that you stay in contact with your account manager here over the coming months who can keep you informed of all the latest market movements.
There is another raft of data expected from the Eurozone today with GDP figures for Spain, unemployment figures for the Eurozone from January and then retail sales figures tomorrow, so the ball is firmly in the Euro’s court to determine rate movement for the end of the week. With the Pound under pressure at the moment and at the mercy of the next move from the House of Commons, we could see some lucrative spikes for Euro sellers. Get in touch with us today on 01494 725 353 to discuss the details in this report further if you have an upcoming Euro buying or selling requirement.
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