The euro has been receiving attention in recent weeks following rising expectations the ECB, European Central Bank, will look to some form of monetary ‘easing’, whether it be cutting interest rates or extending their QE, Quantitative Easing program. Today is the latest Trade Balance data at 10.00 am for the Eurozone, which might provide some indications as to health of Eurozone trade.
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Tomorrow is the latest Eurozone Inflation data plus a speech due by ECB member Coeure. This might present the market with some further information on the likelihood of any extension of monetary easing. The next ECB meeting is the 25th July, which will provide the market with more information regarding the outlook for monetary policy in the Eurozone.
Last week, the FT pointed out odds of a roughly 80 per cent chance of the central bank reducing its interest rate this month or in September. Clients with a position to buy or sell euros ahead might wish to be aware of this event and its potential to move the rates.
Last week’s ECB Monetary Policy meeting seemed to indicate that the policymakers should be ‘ready and prepared’ to consider further easing. In the meeting minutes released last week, this was the language used as reported by the Financial Times, which might indicate further action ahead. Historically, such moves as cutting rates or increasing a QE program would weaken the currency.
Politics is also important in Europe and for the euro, with 2019 seeing rising concerns over more populist governments. The euro did find some support recently with the EU Commissions’ decision to not look at further punishment for Italy. The agreement reached for Italy to seek 0.4% of savings helped paper over the cracks of the immediate problems on its budget plans. Italy has continued to be a worry for financial markets with debt at 132% of GDP (Gross Domestic Product) presenting a danger as to how it will service such high levels of debt.
Despite the potential for weakness, this shorter-term fix has kept the euro stable. Greece instilling a new, more conservative government has also helped the euro to retain some composure. Clients with a euro position can discuss their situation and the events ahead with our team.
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Excellent initial guidance, and during the transaction regular communication and updates. Dealing with Jonathan Watson was a pleasure. Very reassuring.
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