Political and economic issues likely to handicap Euro exchange rates

The Euro has come under pressure against Sterling over recent weeks and this trend was intensified following the resignation of Italian Prime Minister Matteo Renzi. This was discussed during yesterday’s report and following Italy’s NO vote for constitutional reforms, the Euro lost value following the political uncertainty this vacuum has created. The decision for Renzi to step down has left Italy facing an uncertain future and this is always a negative for the currency in question.

Pressure is likely to build on the Euro over the coming days, with the only silver lining for those clients holding the single currency the uncertainty over the UK Supreme Court ruling regarding our Brexit, which could handicap any Sterling advances over the coming days.

The Euro has been riding the crest of a wave ever since the UK’s decision to leave the EU but there are signs that the winds are changing and the current negative trend may be a sign of tougher times ahead. Key figures in Brussels will not have enjoyed watching the Italian referendum results come in and with the likely uprise of the far right 5 Star movement, it is only likely to intensify these fears.

It does feel as though the anti EU groups and feelings amongst the general public are starting to gather pace and with political elections in France & Germany next year, the political and economic landscape inside the Eurozone could be drastically different in 12 months’ time.

We also need to consider the European Central Bank’s (ECB) stance, as this will have a huge influence over Euro exchange rates. The ECB are likely to extend their current monetary policy (QE) programme beyond the current deadline of March 2017 and this is hardly likely to boost investor confidence. Personally I would not be prepared to gamble on further Euro improvements and it may be wise to protect the huge gains made over the past six to nine months.

Key economic data for the Eurozone

Looking at the key economic data for the Eurozone and we have a host of data out over the coming days. Retail Sales figures released yesterday came out above expectation MoM at 1.1% and this helped the Euro to fight back, following its early morning losses against the Pound.

It’s another big day with the release of the latest Gross Domestic (GDP) figures and with the expectation for 1.6% growth, expect additional market movement for the Euro if the figure comes in outside of this remit.

Finally another big release on Thursday with the latest Interest rate decision and monetary policy statement. I expect rates to be kept on hold at 0% but with an expectation that the central bank could well announce an extension to their current Quantitative Easing (QE) programme. If this does occur expect the Euro to weaken as result, so it may be wise to secure any short to medium-term Euro transfers prior to Thursday.

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