The Euro has managed to grapple on to the impressive gains it made against the Pound at the end of last week’s trading having found support in the mid-1.14s in the build up to today’s European Central Bank (ECB) interest rate decision.
In the table below you’ll see high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 to Euros over the last 10 days:
|Currency Pair||% Change||Difference on £200,000|
As a result of all the inconsistent data we have seen from the Eurozone’s major players since the start of the year, the markets aren’t expecting much from President of the ECB Mario Draghi in the way of favourable short-term changes to its monetary policy.
This would have been further compounded during yesterday’s trading as yet another leading European multi-national, Linde, blamed its recent fall in revenue of 7% (YoY) on the impressive rise in value of the Euro, which they said has limited the corporation’s competitiveness on the international stage.
Mario Draghi has made it clear he needs to see real signs of growth in inflation before the economic stimulus provided by the ECB is reduced.
The fear for those holding Euros is this is yet another justification for Draghi to sit on his hands whilst his central bank counterparts pursue a more proactive approach to their monetary policy, which could leave the Euro falling out of favour with investors as time goes on.
It will be interesting to see how Mr Draghi alludes to this trend during his statement due at 12:30 today. Personally, I think a negative tone has already been factored in to current levels, which has allowed those buying Euros with Pounds to continue to enjoy relatively attractive levels throughout this week.
Depending on the tone Mario Draghi sets there is potential for Euro strength as the week comes to a close. Investors will be looking for clues that could undermine the ECB’s cautious stance and given growth levels remain comparatively strong within the Eurozone despite limited inflation and unemployment rates the pressure will continue to mount. This suggests to me that there is plenty of room for improvement which could prompt investor appetite short term.
I think this was reflected in the positive French consumer confidence release posted early yesterday morning and for this reason, it will be interesting to see if the optimism is shared across the block with the Business climate release due from the European commission early Friday morning. This coupled with GDP data and employment levels from Spain, France and Germany may well leave the Euro on a positive note to end the week, making it more expensive to buy.
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