As worries over trade with Iran causes concern for European countries after Trump's withdrawal from trade with Iran, the Euro may continue to suffer from the uncertainty caused. The table below shows the difference in Euros you could have achieved when buying £200,000.00 during the high and low points of the past week.
|Currency Pair||% Change||Difference on £200,000|
Uncertainty has risen on the continent as Italy backs an anti euro power. This coupled with Germany’s attempts to avoid any debt pool has churned up new political risks for the Euro. The major release for the Euro this week will be the preliminary estimates of Eurozone PMIs for Services and Manufacturing in the region, which are due to be published on Wednesday. PMI's are activity metrics generated by survey responses from pivotal procurement managers. They are used to accurately quantify the activity levels of the economy.
As this will be the first release for May they will be utilised with the view to confirm as to whether the slowdown in the first quarter of this year has continued into the second quarter. Any signs of continued stagnation may lead to weakness in the Euro.
A delay in growth in this quarter after the poor first quarter will make the current expectations that the European Central Bank (ECB) will remove quantitative easing (QE) by the end of the year increasingly unlikely. Given that it is only after they remove QE that they can begin raising interest rates this would not bode well for the Euro's future.
The ECB monetary policy meeting accounts due on Thursday will provide further insight into their view on the economy and any future interest rate hikes.
Higher interest rates stimulate a rise in the value of currencies as they attract a greater number of global investors with foreign capital seeking refuge in higher returns.
European businesses have worries of a stretched relationship with the US if they continue trade with Iran following Trump’s withdrawal. Many European businesses rushed to do trade with Iran and display solidarity.
Given that exports to Iran last year were in the region of 11bn, Europe finds itself between a rock and a hard place as the US starts issuing sanctions and putting itself on the opposite side of the board.
With billions of Dollars in trade and thousands of jobs in the balance, the Euro is in an unstable position. A conclusion to the matter is not due until August leaving the Euro in no mans land for the time being possibly suppressing it’s value until the market can be confident on an outcome. Anyone with a Euro requirement may choose to take advantage of this possible lull.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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