European PMI data shows strong signs

Yesterday we had an economic update from the EU with PMI data released. This provided the market with an overall of business confidence including both Manufacturing and Services. It went on to show an overall improvement especially in the manufacturing sector with the fifth monthly increase, and the highest level seen since 2011.

This was really supported by how weak the Euro is which has resulted in an increase in international orders due to the favourable Euro exchange rates. This economic release assisted in the Euro gaining in value through yesterday making it more expensive to buy with both Pounds and the US Dollar.

Future inflation concerns

Yesterday PMI’s data from the Eurozone did however show longer-term concerns for the region. The weaker value of the Euro has made their exports sell as they have become increasingly cheaper for international buyers. However as they now have to start to re-buy materials at a more expensive cost many expect this to impact costs going forward and therefore result in inflation climbing. Couple this with the rising cost of commodities globally and many expect the Eurozone to struggle to remain as competitive internationally in the months ahead.

What is the Euros value in the medium term?

Many clients currently are asking whether the Euro will remain as strong through 2017, I personally expect to actually see a fall in its value due to the headwinds coming its way. Remembering that inflation is expected to climb pushing up prices across the region. Many will be aware however of the elections across Europe in the near term with the Dutch and French going to the polls within the next 8 weeks. Thereafter we potentially have both Italian and German elections in the second half of the year. I for one expect that in a similar way the political uncertainty in the UK has weakened the Pound’s value, the uncertainty and concerns across Europe in their elections and the potential rise of the ‘far right’ parties to weaken the Euro in the second half of 2017.

With the elections in Europe, volatility around the Euro may emerge as markets fear the rise of far right political parties may lead to further breakups from the bloc. At Foreign Currency Direct we offer a number of contract options which can protect your buying or selling position from currency fluctuations. Call today on 01494 725 353 or me at hse@currencies.co.uk to learn more.

News

Read more articles
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.