Euro falls as political concerns build

The value of the Euro has generally been falling over the last week and has potentially started a negative trend. The economic growth within the Euro area has however accelerated and it was recently confirmed GDP grew by 0.5% in Q4 of 2016. This highlights the economic resilience within the Eurozone even in the face of political uncertainty that it faces through this year. These concerns are however growing to a point that despite the improving EU economic data being released the Euro is falling out of favour.

A recent survey of asset managers within the Bank of America Merrill Lynch’s showed that there was a record low sentiment towards the Euro area.

Greece impact on the Euro

The concerns with regards to Greece’s debt levels and repayment abilities have returned and are once more covered in main stream media. Germany have come forward suggesting that they are unwilling to fill the €60+ billion hole in their finances with the IMF also saying they will not contribute.

The meeting on the 20th of February is likely to be when this is concluded before a majority of Europe turn inwards for domestic political elections.

I think that they will however reach agreement and the gap will be filled in an effort to avoid a crack within the European dream. This is likely to create some euro strength once this probably temporary fix is applied once more.

EU Elections updates drive Euro prices

As we get closer to the Dutch election in March, the first round in the French elections in April, second in May and thereafter Germans election in August the euro has started to weaken in value. This is as concerns grow about who will be in control of these main members of the EU.

In a similar way that the uncertainty with regards to the future of the UK weakened the Pound, the political uncertainty within Europe this year could easily weaken the Euro in the months ahead.

The latest on this front is the rise of the far right parties in each member state and the promise from most that they will too hold their own referendums on EU membership. JP Morgan for example has forecasted that if Marine Le Pen of the National Front was to be elected in France it could weaken the Euros value by 10%.

This is a story which will continue to develop and affect the value of anything from a property in the Alps to the value of materials imported from mainland Europe. If you would like to be kept up to date on these developments please register your interest with your broker here at Foreign Currency Direct.

Euro short term forecast

I am of a view that the value of the Euro will weaken in the coming weeks but it is unlikely to move in a straight line. If I was a GBP/EUR buyer I would be looking at market levels today with levels so high and the likely focus on European problems coming out of the EU Extraordinary Economic Summit this morning. If I was a Euro seller I personally would probably wait until next week, German data on Tuesday is expected to show an improvement from the ‘engine room’ of Europe so this may in turn give the best levels. I expect to see GBP/EUR rates between 1.14-1.18 over the coming 6 weeks.

Sentiment around the Euro may continue to head further south in the coming weeks, so why not get in touch with your assigned broker to detail your Euro needs on 01494 725 353. Alternatively, you can email me here if you have any questions regarding this mornings report.


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