Over the course of the last 7 days there have been periods of gains for the GBPEUR which have surprised some. This has been as a result of the stress tests which were conducted recently which highlighted again the concerns within Europe and the potential problems within their economic system. Italian and German banks incurred the most losses, Germany’s Commerzbank share price hit record lows after warning that profits would be down this year. The worst performer in the tests was a bank in Italy which saw its share price fall by 16% last week.
This story highlighted again the on-going issues within Europe, remember that the European Central Bank have continued to inject €80 billion a month into the economy in an effort to stimulate growth. This has been the case for over 18 months now and many had expected to see signs of an improvement by now which is yet to materialise. These concerns also suggest that the interest rate will remain low in Europe for longer.
Moving forward I generally expect buying Euros to get more expensive, as the bad news from the UK is more influential on the market than that of the news coming from Europe. As the UK economy potentially shrinks following the referendum I personally expect to see GBPEUR levels at 1.15 before we see 1.20 again.
Tomorrow we have the next round of data for the UK which is expected to confirm a fall in activity; this will probably result in buying the Euro getting more expensive. On Wednesday we have a number of releases from Italy which are also expected to be poor so the rates are probably going to recover on the day however I do not expect the climb on Wednesday to be greater than the fall tomorrow. As a result if you are buying the single currency this week I personally would be buying at the beginning of the week as there seems to be more risks rather than opportunities.
Euro sellers have had smiles on their faces following the referendum result. Selling €200,000 now in comparison to just 5 weeks ago now gives you over £15,000 more. Many however ask whether there will be further gains and the answer is probably yes. Through August I generally expect the pound to remain under pressure so there is a fair argument to suggest euro sellers will get better prices. These gains however will probably be rather small in comparison to those seen over the last 5 weeks so all should ask themselves whether the risk is worthwhile.
Thank you for reading my Euro currency report, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries at firstname.lastname@example.org, thank you.
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