European news has been rather negative recently weakening the euro's value. Against the pound however this potential movement has been somewhat muted as a result of the changing Brexit horizon, and I don’t expect either to change in the near term. European news has been focussed on both German and Italy, some of the largest and most powerful influencers across the European Bloc.
|Currency Pair||% Change in 1 month||Difference on £200,000|
GBPEUR rates have changed significantly over the last 7 days as a result, visiting a 4-month high only last week after an impressive 3 cent improvement for GBPEUR within 20 days. Over the last 3 weeks GBPEUR levels have changed by over 3.25%, meaning that a well-timed transfer adds over €7,100 on a £200,000 exchange, highlighting how influential these current topics are on the value of GBPEUR moving forward.
The German political world has been shaken by a surprising result in the recent Bavaria election, which has the potential to put the relatively weak coalition under further strain. The next political vote is before the month end and if a similar result is seen it could add further pressure on Angela Merkel to resign. Something I personally see as rather unlikely, however this is a topic to watch if you have euro exposure over the coming weeks.
The current Italian Government voted in a new Budget on Monday which very much goes against the grain. In it they reduced the potential retirement age and increased spending which if approved, would push up the cost of managing their debt to 2.5% of annual GDP. This is three times higher than the EU guidelines and is a topic of contention.
The vote this week was confirming the Government’s proposal meaning it now goes for review before potential acceptance in a matter of weeks. This is not the first or indeed the last time that we will see Italian debt being a front-page story.
Italian debt has been a talking point due to being supported by the European Central Bank Quantitative Easing program, which is expected to conclude at the end of the year. The question has been building as to how they will support this when the largest buyer of their debt stops buying. As a result, this budget may be a negotiating point, but I certainly see this topic continuing to impact the value of the euro, probably in a negative way for months to come.
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