Despite the ECB's measures to boost the EU economy very little appears to be improving. Despite this the Euro has strengthened against GBP recently, in the last 5 days alone a difference of €3,370.69 on a £200,000 purchase has been seen.
The Euro strengthened last week against the Pound by almost 3 cents, making a €200,000 property purchase abroad almost £3700 more expensive throughout the week from the highest point to the lowest point. This strength seen by the Euro was most likely derived from Sterling weakness as the economic data coming out of the Eurozone hasn't been promising recently, especially considering the substantial economic stimulus packages set up by the ECB earlier this year.
In order to stimulate the economies of the 19 member bloc, the ECB has already introduced the potent mixture of negative interest rates to encourage banks to lend, an €80bn a month bond purchasing scheme and affordable loan programs for banks. Nothing so far has brought the region close to its 2% inflation target, and with the Euro strengthening from both GBP and USD weakness over the past week, I dont expect inflation to reach those levels anytime soon as a strengthening currency is likely to ease inflationary pressures.
With both France and Germany expected to release week data later this week, it may be wise to consider to take advantage of the gains made by the Euro last week sooner rather than later.
The two largest economies within the Eurozone are both expected to release disappointing sets of data this week, once again highlighting the lack of growth within the Eurozone despite its recent measures.
According to preliminary figures, the inflation rate in Germany will show a decline for the month of April. This figure will be released on Friday and expected to show a 0.5% drop on a monthly basis, and a 0.3% drop on an annual basis.
Such figures could add to the feelings of unease between the ECB and Germany, as the ECB continues to pour more and more money into the Eurozone in order to increase inflation, whereas many in Germany feel that they are already doing their fair share to boost EU growth. Should the relationship between the ECB and its most important member feel further strain, I think we could expect to see weakness in the value of the Euro.
With jobless numbers consistently dropping and unemployment sitting at a record low in Germany, these stubborn inflationary figures could create major headwinds for the Eurozone and I expect this issue to become more of a talking point in future.
France will be releasing its own set of Inflation data on Thursday, and whilst the economy in France is somewhat different to that of Germanys, the inflation situation is similar and another set of disappointing data could drive down the value of the Euro.
Despite a struggling EU economy, sterling has weakened against the single currency due to poor data and a looming EU referendum. You may wish to discuss options with us ahead of the June event. Email me here if you have any requirements and I will be more than happy to assist you with your questions.
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