With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The table below shows the difference in Euros you would have achieved when buying £200,000 over the past month.
|Currency Pair||% Change||Difference on £200,000|
The Euro has been one of the best performers this year and has climbed by nearly 7% against the USD and 3% against the Pound since the beginning of 2017. Economic indicators coming from the EU has generally showed a continual improvement over the last 6 months. For example, economic growth in the Netherlands rose in Q1 at the fastest pace since the financial crises in 2008, and the French private sector employment grew in June at its fastest rate in nearly a decade. Overall Euro confidence is growing and their latest Purchasing Managers data showed that the amount of Euro area economic activity in Q2 grew at the fastest pace in six years. Many conclude that their QE program is working, this has driven demand for the Euro, making it more valuable and more expensive to buy.
Generally the Eurozone has showed continual improvements however these gains have not come in a straight line. Many are becoming accustomed to the word ‘crisis’, and this was used again over the weekend as the Italian government confirmed it was bailing out two banks at a total cost of over €5.2bn. This had a negative impact on the value of the Euro in early trading this week giving GBPEUR the best levels seen for nearly two weeks.
The loss on the Euro was limited however as the European Central Bank released a statement warning that the banks could fail only 48 hours beforehand. Another argument as to why this did not impact the Euro more is that the total amount of Italian debt is now over €350bn, accounting for a third of the Eurozone’s total debt. This financial burden however is considered to be ‘well structured’ meaning repayments are over tens of years rather than that of Greece which is considered worse as it is measured in months.
HSBC recently caused further doubt over the ability of a debt repayment in Greece, their current bailout programme comes to an end in just 14 months’ time when Greece will have to either stand on its own feet after 8 years of support or ask for another bailout. Personally I think the later in unavoidable and expect when this is confirmed to weaken the Euro – something to watch out for in the medium term.
In the short term the busy day for Europe is Thursday with both Consumer Confidence and Business Sentiment data due. Both are expected to show an improvement as the trend for growth and confidence grows. This however I expect to be overshadowed by UK political news this week but I certainly see there being more risk than opportunity for GBPEUR clients this week.
Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries here.
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