Whilst much of the focus remains on the UK and its post-Brexit outlook, Europe has its own set of challenges to overcome.
Europe has a lot to deal with at the moment and unfortunately it’s mostly negative.
There’s the obvious fallout from the UK’s vote to leave the trading bloc which is likely to impact the Eurozone, and therefore the Euros value as talks progress as to how best to ensure the separation remains amicable. The UK was one of the only net contributors to the EU, with the others being France and Germany so they’ve lost an important member.
Italy has also recently emerged as a country in financial trouble and it’s now public information that their they’re struggling to pay back their debt, with Italian Prime Minister Matteo Renzi suggesting the use of public funds to overcome that issue.
This isn’t the first time the Eurozone has been presented with this issue as Greece has been in the news with similar issues on numerous occasions throughout the past 5 years or so.
In recent years, and particularly in recent weeks it now seems like terrorist attacks are becoming a normal way of life for Western Europe. French Prime Minister Manuel Valls was recently booed in front of a large crowd in Nice after announcing that France should learn to ‘live with terrorism’ just days after the Bastille massacre where 84 people lost their lives.
Terrorism has historically been a main driver of currency weakness but the Euro was surprisingly unaffected despite a further two attacks over the weekend, something I consider noteworthy. I think the tourism industry in certain cities is likely to be affected by the recent events, which is a problem Turkey is currently experiencing to the point where the drop in tourism has reduced the country’s GDP by 1%. So far it remains to be seen how these events will impact Europe’s economies, although I’m certainly not expecting it to be positive.
We’ll need to wait until Friday for this week’s most important economic release. At 10am UK time GDP figures for the 2nd quarter of this year are to be released and a drop of 0.3% is expected, so should that figure disappoint even further I’d expect to see a drop in the Euros value. It may be a good idea to contact your currency broker prior to that announcement should you wish to remove any downward risk from your upcoming currency requirement.
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