In recent weeks the euro has been losing ground against the US dollar and at present the EURUSD interbank rate has dropped to a twenty-month low. As EURUSD is the most traded currency pair globally it’s important to keep an eye on this pair when trading euros with any other currency.
|Currency Pair||% Change (Month)||Difference on £200,000|
It’s clear to see that the euro has problems at present. Italy is in recession, the German car industry is struggling, the socialist party failed to win a majority in the Spanish election this weekend therefore they are trying to form a majority Government with other parties, the European Central Bank is concerned about growth and announced in March that they would start the next targeted longer-term refinancing operations Targeted Longer-term refinancing operations (TLTRO) program where the Central Bank provides cheap loans to bank in a bid to stimulate growth and the list goes on. In addition, the US dollar has been going from strength to strength and only last week US Gross Domestic Product (GDP) numbers sent shockwaves through the market. The numbers were released at 3.2% when many forecasters were suggesting a recession was on the horizon.
Even though the euro is struggling against the US dollar, pound to euro exchange rates have dropped in recent weeks. GBP/EUR interbank exchange rates have dropped 1 ½ cents since the UK extended Article50 by 6 months. This week UK Prime Minister Theresa May is set to continue the negotiations with Labour. So far progression appears to be limited as the pair can’t come to an agreement in regards to a customs union. My personal opinion is that it’s a matter of time until the Prime Minister goes back to Parliament and asks all MPs to vote again on an alternative as the negotiations will be over. If this materialises the pound could face further pressure against the euro.
Also this week European GDP numbers are set to be released at 9am Wednesday morning. Yearly GDP is set to remain at 1.1% however quarterly GDP is set to rise slightly to 0.3% from 0.2%. If this occurs the euro could have a good start to the day against the pound. However, the US are set to release their latest interest rate decision Wednesday evening. With US GDP exceeding expectation last week, it could be difficult to see how the central bank will remain as dovish as they have been. Therefore, this may see EURUSD fall further and consequently GBPEUR rise. For clients that are selling euros this week an opportunity may present itself Wednesday morning.