This Euro report looks at factors that are likely to affect exchange rates this week and discusses whether the Euro is currently overvalued.

GBP/EUR is only at current buoyancy levels due to the EU Referendum. I think the Euro is far weaker than current rates suggest. Mario Draghi, the head of the European Central Bank (ECB) has already taken significant steps to try and stimulate growth in the Eurozone through changes in monetary policy. He said that after March’s changes in policy there would be no further stimulus or changes in interest rates. I would not hold my breath.

ECB governing council member and head of Germany’s Bundes Bank, Jens Weidmann conducted an interview in Die Welt magazine and he was heavily critical of current monetary policy in the Eurozone, it has resulted in GBP/EUR hitting 1.28 this morning. He said some measures blurred the lines between monetary and fiscal policy. It could also be an insight as to discussion at the ECB monetary policy meeting on Thursday.

Greece is a worry for the Eurozone economy. The Greek economy has fallen back by 0.4% according to the latest figures. There are concerns whether a deal can be negotiated with the International Monetary Fund (IMF) this month. This could lead to Greece defaulting and could lead to a Eurozone exit. If this were the case it would set a president and other struggling Eurozone members may wish to follow suit. This would be catastrophic for the Euro.

If you are a Euro seller it may be wise to take advantage of current market levels.

Key data releases for the Eurozone

Today at 09:00 brings Trade balance data. Trade balance is the difference between imports and exports. A positive value shows trade surplus whereas a negative value shows deficit. I expect to see weaker than expected figures and the Euro to lose value as a result. Inflation data comes out at 09:00 tomorrow and I expect a contraction which again could be bad news for the Euro. Keep an eye on the ECB Monetary Policy Meeting at 11:30 on Thursday. It will give an insight into monetary policy moving forward and could cause volatility if there is mention the current stimulus package is not working.

Thank you for reading my Euro currency update, if you have any questions about Euro exchange rates or the impact of the EU Referendum I would be happy to discuss them – you can contact me with any queries at dcj@currencies.co.uk.

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