Political uncertainty has now arisen in another area of the EU, with Spanish Prime Minester expelled from office following allegations of corruption. This is the second in close succession to the previous Italian uncertainty of the past few weeks, which could start to impact the Euro in a more lasting fashion. The Euro report below discusses how political uncertainty is able to affect the value of the currency in question. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points of the past week.
|Currency Pair||% Change||Difference on £200,000|
The Spanish prime minster, Mariano Rajoy, was ousted on Friday by MP’s in Madrid in the wake of a corruption scandal. Whilst Madrid scrambles to formulate another government, sceptics have already started to reignite fears of the Catalan independence. Madrid struggled to contain the backlash last year and the consequences were detrimental to the Euro.
Political instability in Italy last week has also alarmed the markets. Ultimately, for our readers the important thing to take away from this week is that the two parties, Five Star and the League seemingly backed down at the end of the week.
The markets welcomed the fact the the parties have agreed on a less provocative and anti-EU finance minister than Paolo Savana, who has openly criticised the EU’s fiscal policies in the past. His move to become Italy’s finance minister was seemingly blocked by Prime Minister Sergio Matterella. However, he is still not completely out of the picture, having been appointed the coalitions minister for European affairs.
It is for this reason, why I personally think that we may now start to see a shift in the GBPEUR rate. The problems within the Eurozone seem to disappear for a time, only to reappear further down the line, otherwise known as kicking the can down the road. Italy’s fivestar/league coalition will call for Europe to look at its fiscal policies or threaten leaving the EU. We only have to think back to when the possibility of Grexit loomed and how detrimental this was to the Euro’s value. Finally, will this play into the hands of the Brexiteers and strengthen the UK’s negotiation powers?
The G7 summit hosted in Canada this week is expected to draw some attention, with the European leaders meeting with President Donald Trump later this week. President Donald Trump’s stance on trade with the EU has caused the markets to wobble, and if this continues I wouldn't be surprised to see Euro weakness as investor’s confidence in the Euro is likely to drop. Away from politics, the latest purchasers managers index figures and growth data will be released this week. These figures will be keenly watched to see if the fears surrounding the subdued economic performance of bloc is likely to continue and the effect this will have of the European Central Bank’s decision on monetary policy moving forward. If these figures disappoint i would expect the Euro to weaken across the board, highlighting an opportunity for Euro buyers.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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