Despite the possibility of weakness for Sterling short term against the Euro, The Euro could have some serious issues on the horizon. First up, we have the General Election in the Netherlands. This is due to commence on 15th March. There is a strong possibility Geert Wilder’s PVV party could gain power. It is well known Wilder has a very anti EU stance and if he becomes Prime Minister another Referendum could be in on the cards which would hit the Euro hard.
Next up is France, Marine Le Pen could gain Presidency and she has very similar views toward the EU as Wilder. Potentially there could be as many as three countries holding a Referendum on EU membership. The domino effect could be in motion which could have serious consequences for the Euro.
There is also Germany’s election later in the year and following on from a number of terrorist attacks, Angela Merkel’s very liberal stance on immigration could sway the voters with right wing parties waiting in the wings.
Let us also not forget the bad loans from Italian Banks in excess of €360bn, the Greek debt crisis and serious Eurozone inflation trouble. It would not surprise me to see GBP/EUR above 1.30 by 2018.
Services PMI and Consumer Price Index (CPI) data is released this morning. Probably most significant will be CPI. CPI is a key barometer for inflation and with the Eurozone stuck with stagnant inflation, investors will have a keen eye on this new data. This could have a large bearing on Euro position.
Tomorrow morning, we have Producer Price Index (PPI), which measures the change in prices received by domestic producers of commodities in the stages of processing. PPI could do with a much needed boost as figures have been very poor of late. More important however is the European Central Bank monetary policy meeting in the early afternoon. This meeting addresses the state of the current global economy along with monetary policy.
These meetings have been known to give an indication as to monetary policy moving forward and as such can cause volatility for Euro exchange rates. It would be wise to keep an eye on how the meeting develops if you wish to capitalise on any potential spikes.
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