German inflation data is due to be released at 1pm today, if these figures come out less than the expected 1.6% increase we could see some volatility for the Euro. This market report discusses the factors that are currently affecting Euro exchange rates; 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 30 days.

Currency Pair% ChangeDifference on £200,000
GBPEUR2.2%€5,050 EUR

Is this the end of the Euro’s strong run?

The Euro has fallen recently against the Pound but still remains historically strong against the US Dollar. However, we have seen some signs of problems ahead for the single currency.

The recent Italian election showed that votes went against the more traditional parties in favour of more anti-establishment and far right parties and this ended up with a hung parliament, which has still yet to be resolved. Behind Greece, Italy has experienced the second-largest fall in output in the last ten years and as we have seen a fall in output will often result is a change of political support for a different ideology.

Italy is a very divided nation between the industrial north which is the heartland of the far-right Lega Party whilst the Five Star Movement which is based in the south has some areas with as much as 60% unemployment levels.

With the coalition talks still not yet fully resolved I think this could potentially cause further problems in the short term for the Euro as Italy is the third largest economy is the Eurozone. It is likely that the two parties will come to some arrangement but as yet the timescale has not yet been decided.

The risk this poses to the Eurozone is that if the anti-establishment sentiment continues in the longer term this could destabilise the EU and ultimately cause the Euro to weaken in the longer term.
Germany’s manufacturing sector continues to struggle

Could Inflation cause an ECB rethink?

Germany is due to release their latest Inflation data at 1pm today and as the Eurozone’s largest economy this can often cause big movement for Euro exchange rates. The expectation is for 1.6% year on year so anything different could cause some volatility. Eurozone inflation has been falling recently and this has caused the European Central bank to think twice before ending their current QE programme which involves €30bn per month currently set to end in September. On Tuesday the latest Markit Manufacturing data is due to be released and with expectations for 56.6 if we see a fall this could see the Euro fall early next week vs the Pound and Dollar so if you’re considering selling Euros it may be worth organising this in the short term.

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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Exchange rates on this page are interbank rates and indicate where the market is trading to show the performance of a currency pair. They are not indicative of the rates which we offer. The information on this web site is provided free of charge for information purposes only. It does not constitute advice to any person on any matter. Foreign Currency Direct plc. ("FCD") makes every reasonable effort to ensure that this information is accurate and complete but assumes no responsibility for and gives no warranty with regard to the same.