Despite a complete lack of data and activity from much of the Eurozone yesterday with the Labour Day bank holiday, the single currency managed to make further gains against the Pound as the chances of a rate hike in the UK begin to look continuingly less likely. In the table below you’ll see high to low GBP/EUR exchange rate movement when exchanging £200,000 to Euros during the last 30 days.
|Currency Pair||% Change||Difference on £200,000|
It wasn’t a particularly strong day though, with the Euro falling by almost three-quarters of a cent against the Dollar, which goes to show that there are still some underlying weaknesses for the Euro and therefore some potential for the Pound to claw back some of its losses, if it can capitalise on this.
One factor that could weaken the Euro in the future is the ongoing impasse with the US over trade tariffs, after the EU warned yesterday that they were fully prepared for a trade war if they are not given full exemption on Trump’s proposed Steel and Aluminium tariffs. This issue is heightened further by the fact that Australia, Brazil and Argentina have been exempt from these, whilst the EU have been given only a 30-day exemption, which could cause future uncertainty and weigh on the Euro's value.
On Monday the ECB’s future plans to wind down their current asset purchasing programme in September was thrown in to doubt when inflation data for April grew at a slower pace than was originally expected.
Another issue is that Germany’s Consumer prices are closer to the bank’s 2% target at 1.6% whilst Italy and Portugal are way off the mark. This disparity across the bloc will undoubtedly cause a headache for the ECB as we get closer to September and if there are any comments from the ECB that contradict their stance from earlier this year then we could see some weakness in the Euro in the future.
I believe that any clients who are selling Euros would be sensible to consider taking advantage of current levels, which are currently offering the best return on a EUR/GBP trade since the middle of March.
Today’s GDP figures at 10am this morning could weigh on the Euro’s value, with the initial predictions expected to show a slower rate of growth that last years and last quarters figures. There are also unemployment figures released for the Eurozone as a whole at the same time. Although this figure is expected to remain in line with what has been the norm of late, similarly to the recent inflation data, unemployment across different countries in the bloc and different age groups, in particular under 25’s, is particularly high and if this is highlighted, could offer a spike for clients buying Euros.
Inflation data will also be of interest on Friday morning. As I mentioned previously, these figures will be closely watched when the ECB consider their next monetary policy move so should be keenly watched by anyone with a Euro requirement as they have the potential to create added volatility.
For more information on how future events could affect EUR exchange rates, call our team on 01494 725 353.
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