We have seen this week the first real bout of Euro weakness as a result of political uncertainty in the Eurozone as Marine Le Pen performs well in the latest polls. Marine Le Pen is predicted to perform best in the first round which takes place on the 23rd April, only 2 months away. Second place is expected to be Emmanuel Macron and Francois Fillon, and it is the second round of voting on May 7th where Marine Le Pen according to the predictions is expected to struggle.
Before then we have the Dutch election on the 15th March where a similar challenge is presented to the far-right. Geert Wilders is one of 8 parties fighting for 150 seats. Predicted to win 23-26 but nowhere near enough for a majority, other parties have already refused to enter into coalition with him and will actively work against him to form their own collation without him. I expect the Euro to remain highly susceptible to further headlines and news relating to the likelihood of either Le Pen or Geert Wilders performing well in these important pending votes.
Rather frustratingly after years of struggling the Eurozone economy is finally posting improved economic data only for it to be undermined by a deteriorating political situation. If you are buying or selling Euros expect some volatile waters ahead, keep in touch with your account manager for the latest news.
With limited economic data out today sterling should hold onto most of the gains of this week, Italian industrial figures are unlikely to unsettle the current mood. Next week important Eurozone data is Inflation data on Thursday and Retail Sales Friday. I think a fair GBP/EUR forecast is for 1.15-1.20 for the coming weeks as increased political uncertainty is put on the Euro. I do believe this has already been largely priced in, financial markets got their fingers burnt by Brexit and Trump so are covering for a Le Pen or Wilders victory more than we might have expected.
Another battle ground will I believe centre on the likelihood of the US raising interest rates versus the fear over political uncertainty in the Eurozone. I believe GBP/EUR is at a very important juncture and whilst I suspect moves higher towards 1.20 are likely in March, previous challenges to this level have in the end proved unsuccessful leading to with hindsight unnecessary heartache for bold Euro buyers with Pounds.
With Greek debt talks making some limited progress this week the Greek debt issue has gone away for now. The next tranche of bailout cash needs to be provided before July subject to Greece implementing further reforms. With Euro buyers looking at almost the best rates to buy Euros with pounds in 2017 and the uncertainty ahead of Brexit the current prices should not in my opinion be taken too much for granted.
Buying €200,000 today is £13,321 less costly than October and £8,939 less costly than in January. Whether you want to buy at 1.20 or sell at 1.15 speak to your account manager to register your interest because the next few weeks are almost guaranteed to trigger volatility and be much more interesting than we have seen more recently.
The political landscape could be set to change in Europe, and clients may be wise to consider the different options available to them to limit risk in a very uncertain market. Call us on 01494 725 353 or email email@example.com to learn more.
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