This Euro report discusses the catalysts for the Euro's improvement this week, and looks at what lies ahead for EUR exchange rates. The table below shows the movements in the GBP/EUR rate in the last month:
|Currency Pair||% Change||Difference on £200,000|
Any clients with an upcoming EUR currency positions, will have been pleased by market developments early this week. The single currency has found support, making gains against both the Pound and USD.
The GBP/EUR exchange rate fell as low as 1.1234 during Tuesday’s trading, with the Pound coming under pressure following comments made by the EU’s chief negotiator Michel Barnier. As touched upon in yesterday’s report Barnier has made it clear that the UK cannot work outside of the EU’s laws, whilst expecting not to have any restrictions on trade.
Whilst his tone was softer than it has been in some of his past addresses (possibly because he was talking outside 10 Downing Street), it is clear that the EU’s hard line stance on Brexit negotiations looks set to continue.
The EU seem to be in the driving seat and this in turn is causing investors to leave their funds in the EUR, which is seemingly turning into a more stable and “safer haven” currency than the Pound.
This complete turnaround in market perception since the EU referendum result is portrayed in the recent economic data releases for each economy, with the UK’s downturn the complete opposite of what is evidently, a thriving Eurozone economy.
Yes the EUR has weakened slightly from the dizzy heights it achieved late in 2017 but the outlook for the Eurozone remains far healthier than that of the UK’s, which is continually dwarfed by the uncertainty surrounding Brexit.
Despite some weaker than expected Eurozone Retail Sales figures EUR/USD also improved, moving back above 1.24.
It has been well documented that the Eurozone economy has outperformed expectation at almost every turn, providing a steady platform for the EUR progress over recent months.
The European Central Bank (ECB) and its President Mario Draghi have remained steadfast in their commitment to the current monetary policy (QE) programme, which they feel has helped support the Eurozone economy through a time of economic uncertainty.
Draghi believes that the results are clear and that the Eurozone economy is now starting to progress because of this.
It was interesting to note that none of the ECB members felt the need to talk down the EUR, which they have been known to do in the past for fear of it becoming over-valued. This in turn will have a negative impact on exports of the Eurozone’s goods & services, due to the fact that they will become too expensive for trade partners to buy.
Whilst it is clear that the EUR is enjoying a good run, the Pound and USD have gained a foothold over recent weeks. With so much uncertainty regarding Brexit negotiations and how the EU itself will fare once the UK leaves the single bloc, I expect increased strain and volatility on the currency markets as Brexit negotiations drag on.
As such it may be worth removing any risk and taking advantage of the current levels, which remain extremely attractive, particularly when you consider the relative history on the pairs.
For more information on how future events could affect your Euro transfer, call our trading floor on 01494 725 353 or email me at email@example.com.
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