This week President of the European Central bank devalued the euro when he announced at the ECB annual conference in Portugal that further stimulus and interest rate cuts are on the horizon if inflation does not increase to the target of 2%.
|Currency Pair||% Change (Month)||Difference on £200,000|
The President went on to say that in the upcoming weeks the Central bank will work out its options. A real concern is that according to euro stats, annual inflation for May was released at 1.2% from 1.7% in April and the three lowest countries were Cyprus (0.2%) Portugal 0.3% and Greece (0.6%).
All eyes now turn to the inflation numbers released at the end of the month. If inflation continues to decline, another round of QE (quantitative easing) is on the horizon and history tells us that the euro could devalue if this announced.
Over the last 3 years ‘Brexit’ has been the key driver for sterling exchange rates. Brexit may continue to remain to be the key driver for pound to euro exchange rates in the months to come. Over the last 6 weeks GBP/EUR mid-market exchange rates have dropped from 1.1750 to current levels of 1.1250.
If Boris Johnson does manage to secure the top job, his approach will be different to Theresa May’s, therefore further volatility for the pound against the euro could be on the horizon. For clients selling euros a close eye should be kept on the ECB’s next move as another round of QE could be detrimental for the euro.
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