Brexit uncertainty helps Euro to two-month high

With the Pound plummeting against the Euro so far in 2017, the single currency has managed to cement the Pound’s woes further still over the past few days which has helped the Euro reach a two-month high against Sterling. Despite the global uncertainty since Brexit and Donald Trump’s victorious Presidential campaign, economic data from the Eurozone has been strong of late, with unemployment numbers across the economic area at there lowest levels since 2009.

The Euro will have a chance to maintain its momentum tomorrow with industrial production and inflation figures, both of which are set to show an improvement.

Following these we have the European Central Bank’s minutes from their most recent Monetary Policy meeting at 12.30pm. In their last meeting, it was announced that interest rates would stay at record lows of 0%, but that the amount of money in Quantitative Easing pumped in to the economy would be cut from €80bn to €60bn per month. This report today will give us an insight in to the reasons behind this decision and may also give us some hints in to what they could be set to announce at their next meeting on the 19th of this month. With inflation rising rapidly in the Eurozone there have been calls, especially from Germany whose economy is performing particularly well, to raise the base rate from its record lows. I would expect to see Euro volatility as events tomorrow unfold so stay in touch with your account manager here to keep abreast of all the latest market movements.

How long will the Euro’s gains last?

Although the Euro has strengthened significantly against the Pound in recent weeks, I believe that clients selling Euros may be sensible to cash in on the gains we have seen before it is too late. In my opinion, these gains for the Euro are more based on the Pound’s woes and I still feel that there are fragilities within the Eurozone that could weigh heavily on the single currency’s value during the course of this year. For example, although Italy now have a new Prime Minister since Matteo’s resignation and there is now a plan from the state to rescue Monte di Paschi, their largest bank, there are also other large banks in Italy in need of additional capital and there is still the rise of the far right party, Five Star. We also have elections in France, Germany and the Netherlands on the horizon and with the far right parties gaining momentum there too; I believe that the Euro could come under a lot of pressure as the headlines move away from Brexit and on to pastures new.

Thank you for reading my Euro forecast, if you have any questions about Euro exchange rates I would be more than happy to discuss them – you can contact me with any queries at rjh@currencies.co.uk.

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