Will the Euro fall further in 2017?

The EUR decline has increased in recent weeks, with pressure building on the single currency. Investor confidence is waning as economic and political issues across the region intensify, with further uncertainty over the coming months highly likely. The Euro performed extremely well for an extended period, particularly against Sterling following the UK’s decision to leave the EU. GBP/EUR rates dropped below 1.10 and at the time it looked as though the Euro momentum could carry it further.

However, the single currencies value was somewhat distorted due to the complete lack of investor confidence in the UK economy and ultimately Sterling and at the time I felt it would be difficult for it to make another aggressive move.

Since this high we have seen a switch in market conditions, with the Euro coming under increasing pressure over recent weeks. GBP/EUR rates hit 1.20 and although EUR found support around this level the recent highs now seem like a distant memory.

What are the economic problems facing the Eurozone?

The problems facing the Eurozone have become more apparent in recent weeks, with the catalyst seemingly being the extension of their current monetary policy (QE) programme from March to December 2017. European Central Bank (ECB) President Mario Draghi cited a positive reaction by the economy to the current stimulus measures but the markets took it as a sign of weakness and EUR weakened as a result.

The bad news continued for the EU following the recent Italian referendum result, which caused former Prime Minister Matteo Renzi to step down. This caused further market uncertainty due to the vacuum it created and the political uncertainty attached with this decision. With far right movements gaining momentum across Europe 2017 looks as though it could throw further controversies and turmoil, particularly with key elections in France and Germany.

EUR/USD rates have also fallen to some of their lowest levels of the past 10 years, as the recent rate hike by the US Fed alongside the negative issues already mentioned continue to pile pressure on the single currency.

This leads me to the conclusion that those clients holding EUR should be following market developments extremely closely and due to the likelihood of increased economic pressure on the Eurozone as we head into 2017, the current exchange rates for EUR sellers may look extremely attractive in the months ahead.

With a number of hurdles for both the UK and EU next year, securing a rate of exchange ahead of Brexit and the European elections may help to provide peace of mind whilst markets remain volatile. Call us on 01494 725 353 or email mtv@currencies.co.uk if youd like to learn more.


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