ECB comments strengthen the Euro

European Central Bank president Mario Draghi spoke yesterday in a televised press conference to say that any change to their current monetary policy is not currently necessary. Minutes from the latest Monetary Policy Accounts from their previous meeting suggested that the ECB was in a broad agreement that it would carry on its current QE policy and that although there is room to change if required at the moment this will stay the same as long as inflation continues to remain at the same levels.

The comments from Draghi helped to strengthen the Euro vs the Pound which saw the Pound lose the gains it had seen earlier this week when GBPEUR exchange rates hit their highest level in over a month. As predicted by my colleague Daniel Johnson in yesterday’s market report the ECB accounts caused movement upon their release.

 

Will the French election cause problems for the single currency?

With now just over 2 weeks to go before the French go to the polls in the first round of elections it appears as though National Front leader Marine Le Pen is still likely to get through to the second round which is due to take place on 7th May.

However, far-left candidate Jean-Luc Melenchon is now gaining support and is potentially going to make the French presidential election a four horse race. The Communist party candidate gained some strong support after a TV debate earlier this week and according to a poll was just 1%-2% behind Francois Fillon. Although Melenchon clashed with Le Pen his views on changing the current set up of the European Union are similar.

Is this the end of the strong run for the Euro?

The current likelihood is that Emmanuel Macron will be the victor but with just two weeks to go we could see a surprise shift in the voting. As we have seen with the Brexit vote as well as the Trump victory there appears to be a desire for social change. However, as Geert Wilders was defeated in the Dutch elections last month the feeling of Euro-scepticism appears to have slowed. If we do see a surprise win for Le Pen this could cause a dramatic weakening of the Euro but personally I expect Macron to end up winning quite comfortably. What is likely though is that we’ll see some volatility for Euro exchange rates vs the Pound during the two week period between the first and second round of voting. If you’re in the process of selling a property in Europe over the next few weeks in order to avoid any potential risks to the downside it may be worth purchasing a forward contract which allows you to fix an exchange rate for a future date for a small deposit. If you take an example of a 5% movement in the wrong direction this could be as such as £9,000 on a currency transfer of EUR €200,000.

If we do see a surprise win for Le Pen this could cause a dramatic weakening of the Euro

Get in touch with us today if you have an upcoming requirement for the Euro, the French elections could stir some volatility for the single currency. Call us 01494 725 353 or email me here to learn more.

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