The euro managed to hold its ground firmly against the pound and the US dollar at 1.11 and 1.13 respectively yesterday, despite the latest business confidence report from Germany falling noticeably short of expectations during yesterday’s trading.
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These levels are proving to be key resistance points due to concerns surrounding Brexit but also political and economic concerns in Europe, therefore clients with an immediate euro requirement may wish to reconsider their targeted trade levels as a result, as it seems investor confidence in the euro may not be so easily swayed this side of Christmas at least.
Although this did little to move the euro's value, the markets will certainly have taken note however as the report followed on from last week’s disastrous Markit PMI releases from the Eurozone, as well as Monday’s extremely weak core Inflation figures for November which were released at just -0.3% month on month.
This all points towards fairly weak growth prospects for the New Year ahead and I wouldn’t be surprised to see the euro gradually fall out of favour with the markets, particularly with the US dollar likely to be the main focus for investors with the Federal Reserve widely expected to raise interest rates again this evening.
With all this in mind, it would be quite feasible to imagine the pound comfortably trading above the 1.15 mark had there been more certainty in Brexit talks at this stage. Clients looking to sell euros may want to consider their options while rates remain attractive, as there is every chance we could be looking at a far weaker euro if there are any positive signals surrounding Brexit discussions over the coming weeks.
Another factor weighing on the euro is the Retail sector, as the start of the week saw serious drops in shares of the majority of Europe’s major Retail brands after ASOS’s profit warning pointed towards a fairly lacklustre festive period, with ominous times for the sector potentially just around the corner.
Europe’s retail index fell to 2016 lows on Monday, with major brands such as Zalando (-11.6%), Boohoo (-13.7%) and H&M (-8.5%) all posting considerable losses. The fall in confidence clearly reflects a shift in consumer sentiment, which I believe could quite easily filter into the currency markets.
European economic data is light as we head towards the end of the week, however with so many other events happening outside of the euro, including UK and US interest rate decision announcements, we could see swings in euro exchange rates depending on these outcomes.
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