Between Monday and Thursday of this week, the European Central Bank (ECB) has four members consisting of Sabine Lautenschlager, Luis de Guindos, Benoit Coeure and Yves Mersch, who are to make speeches surrounding the Eurozone and Brexit negotiations.
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These speeches come after the ECB President Mario Draghi’s dovish talks in the ECB Forum last week where he mentioned his concerns over the EU meeting its inflation target, and the potential for having to cut interest rates as a result of the anticipated shortfall. He stated that “In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required”. This speech immediately caused the euro interbank rate to fall, in particular against the USD with a significant 0.2% drop within minutes of the remarks. Following this, clients holding euros who may be concerned over the strength of the single currency may wish to get in contact with us for a quick update on the market.
On Friday morning, the biggest data release for the Eurozone is published in the form of the Consumer Price Index (CPI). This report, created by Eurostat provides an insight into consumer spending and any significant trends associated with what people are buying more or less of.
The current level is, at an all-time record high 105.24, marginally up from 105.10 in the previous month and therefore points to a more positive outlook for the Eurozone. However, should this next update show lower, bearish readings there is the potential of an immediate weakening in EUR rates. As a result, you could see high euro movement in the next few days leading up to and following this release.
The Eurozone receives continuing pressure from one of its member states Italy as the debt crisis for the country worsens. Italy’s deputy PM Matteo Salvini has been in talks in Brussels to discuss their financial situation and has threatened the EU with an ultimatum. Unless Italy receives €10bn worth of tax cuts from the EU, Salvini will resign from his position and bring down the government. This statement has since gained support from Italian PM Giuseppe Conte who has hopes to offset the debt crisis with increased tax burdens for citizens next year once the economy has re-stabilised.
The increasing tensions between Italy’s government and the EU Commission has seen a weakness in the euro especially following the announcement that the EU would be sanctioning Italy for not staying on track to retain its budget deficit. The agreed target was 2.4% but have fallen well short of this goal and with this figure growing, it is expected that tensions will continue to rise amongst the EU. With this in mind I would suggest that clients who are holding euros to get in touch to discuss your options for transfers moving forwards as EUR exchange rates could be under short term pressure.
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