Volatile day for the Euro

Yesterday saw a quick spike for the Euro against the Pound as Chancellor Phillip Hammond urged for a transitional deal for Brexit. By suggesting a prolonged timescale would be preferential for both the UK and the Eurozone; investors seemed to take this as a slight step back from the aggressive stance taken by the Government in the lead up to Brexit negotiations. The Euro jumped from 0.836 to 0,842 against sterling, offering a fantastic selling opportunity for those holding the single currency.

In fact, on a €200,000 transfer, a well-informed Euro seller could have brought home an extra £1,200.

However these gains were quickly surrendered as the Euro slumped as low as 0.83 once again following the news that the Italian Government will be willing to pass an emergency decree to support its major banks including the struggling Monte dei Paschi, despite seeing Italy’s oldest bank’s recovery plan extension rejected by the ECB.

What next for the Eurozone?

Unfortunately for any of those hoping for a recovery before the new year, the list of factors driving Euro weakness towards the close of the year seems to be mounting.

The Euro has been marooned at almost decade lows of 1.06 against the US Dollar, as the struggle to fight back amidst political uncertainty continues.

Wednesday’s well documented FED rate hike decision will more likely than not bring added pressure to the single currency. With the majority of analysts suggesting all fingers are pointing towards a rate hike you can expect to see the Euro plummet further as investors will be looking to capitalise on the promises of higher returns on investment in the US Dollar.

Furthermore, the instability within the Italian banking sector seems to be gathering momentum as the implications of a 5 billion Euro bailout become apparent. The European central bank seems to be forcing the Italian government into action and we should be seeing the immediate repercussions of this over the coming weeks.

I would strongly advise Euro sellers to get in touch with their account manager before these factors come into play so they can build a strategy to protect their returns ahead of any volatility to come.

Key data releases to consider

Tomorrow sees a raft of data from the consumer price index released from Germany. Being the EU’s leading economy, anything that falls short from the expected 0.8% mark will bring further questing of the ECB who only last week decided to adjust their quantitative easing program. I expect this to be compounded by manufacturing data released across Europe at the end of the week.

The negative sentiment around the Euro could be set to continue in 2017, with this in mind Clients holding the Euro to buy the Pound or US Dollar may seek to protect themselves from further movements. Call your assigned currency dealer on 01494 725 353 or email bts@currencies.co.uk if youd like assistance in signing up for your free account.

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