President Macron has had some of his EU reform support in Spain taken away due to pressure from Germany, there are now no dates being mentioned for when the reform needs to take place. This could lead to Euro weakness if European infighting ensues. This Euro report looks at how disagreements such as this could affect the Euro. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points of the past week.

Currency Pair% ChangeDifference on £200,000
GBPEUR-1.16%€2649.21

Strong Euro begins to impact manufacturing growth in the Eurozone

The Euro weakened against most major currency pairs yesterday, as some early morning economic data releases put the single currency on the back foot.

Manufacturing growth has fallen through April, with factory PMI figures hitting the lowest levels in 14-months. This signals a slowdown moving forward in the industry, with Purchasing Managers Index (PMI) figures being a forward looking economic indicator. Factories within the region appear to be bearing the brunt of the stronger Euro which is currently up against the US Dollar by over 2% so far this year. New Export Orders have also waned as it appears that the stronger Euro is negatively impacting the economy, although many might argue the Euro strength is justified after the Eurozone was unexpectedly the best-performing major economy last year.

Although the Pound to Euro rate recently hit an 11-month high, the Pound hasn’t strengthened against the Euro to the extent that it has against many other major currency pairs. I think that if weakness sets in for the Euro we could see a big jump for the GBP/EUR rate, as the pair are currently trading over 10-cents below the average for the past decade.

Divisions within the Eurozone?

French President, Emmanuel Macron was dealt a blow yesterday in his quest for European reform. He would like to see deeper financial integration within the Eurozone, and he’s trying to persuade German Chancellor, Angela Merkel to agree to a common backstop for euro-area bank deposits. This is try and create a level playing field for lenders in region.

Spain has been a key ally for Macron so far, but yesterday it was reported that Spain has dropped most its reform goals to be hit by June due to opposition from Germany. With Spain easing off and Merkel stating that such reform won’t come into effect until the ‘distant future’, there could be infighting within the Eurozone in the months to come, which has the potential to weaken the Euro.

coudl the sell-off in Italian assets spill over into the value of EUR?

ECB meeting this Thursday to take centre stage

Despite the strong Eurozone economy there aren’t any interest rate hikes from the European Central Bank expected until 2019, although the ECB’s asset purchasing plan is expected to end this year according to many economists.

One issue the ECB faces is low inflationary pressures which may scupper these plans, and I expect this to be a potential downside for Euro sellers moving forward. At 1.30pm on Thursday the ECB monetary policy statement will take place so I expect any allusions to the inflationary pressures to be highlighted by financial markets as they could lengthen the current monetary policy plans. Do get in touch if you wish to discuss this matter in more detail.

For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.

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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.