President of European Council Donald Tusk spoke with a sombre tone in Brussels yesterday, following the triggering of Article 50.
He spoke of “already missing the UK” but was adamant that a fair deal must be reached for the EU and not only the UK. He spoke of a “strong mandate” to protect EU interests and to minimise any costs for EU citizens & businesses. His tone was bullish and seemed to help support the EUR from further losses after the devaluation of the single currency earlier in the day. It was clear that he felt the UK had made the wrong decision but focused more on a united Europe, rather than the withdrawal of the UK itself.
The Euro found support under 1.16 against the Pound, before regaining approximately half a cent against Sterling, but now may well be the time to sell your EUR positions. The single currency has been supported for months by the uncertainty created by Brexit and with that now removed, do you realistically see another aggressive spike for the EUR?
The Euro is undoubtedly overvalued against the Pound and this was due to a complete lack of investor confidence in the UK economy, rather than an overriding one in the Eurozone’s. You only have to look at the current levels on EUR/USD rates to realise that investor confidence in the single market is low and as such any positive developments regarding the UK’s Brexit negations over the coming months could boost Sterling’s value further.
Looking ahead and with key elections in France, Germany later this year and support for the far right parties in each of these countries, it is clear that all is not well inside the EU. As with the UK’s unexpected decision to leave the EU has proved, the expected Political result does not always come to fruition.
Any uprising across Europe is likely to sap investor confidence in the single currency further and the current rates against the Pound in particular, could look extremely attractive in months to come.
This view is even more poignant when you consider recent developments in Greece, who once again are coming under the spotlight due to fears they simply cannot service their ever growing debt repayments. As such they may have no choice but to leave the EU further down the line, news which would likely send shockwaves through the market and the EUR will likely suffer as a result.
A number of key political and economic events will continue to drive Euro exchange rates, and staying in touch with your broker regularly will ensure you do not miss out on any potential market movements. Call us on 01494 725 353 or email me here if you would like to talk to us about a currency requirement.
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