The Euro has been faring better rising against both the Pound and US Dollar. Many clients looking to buy Euros have been expecting weakness following a series of uncertain events including worrying political situations in Italy and uncertainty over Europe’s migrant policy. Todays's Euro report looks into recent positive comments from Mario Draghi, as well as upcoming economic data releases with the potential to impact the single currency. The table below shows the range of exchange rates between GBP and EUR throughout the past month.
|Currency Pair||% Change||Difference on £200,000|
In classic Eurozone style the events have been countered with progressive cooperation which whilst not solving the issues, does make them more manageable.
The Euro benefitted yesterday from a positive assessment by Mario Draghi who highlighted how successful the monetary policy regime he has overseen has been. Some €2.4tn worth of Quantitative Easing and negative interest rates have all helped to get the Eurozone economy back on track, he was keen to point out. Whilst the last ECB (European Central Bank) meeting saw the Euro weaker as the ECB scaled back its plans to raise interest rates, by announcing an end to their stimulus program the general trajectory is one of positivity from the ECB.
In news that is concerning, Draghi also highlighted Italy's debts to the Eurozone are predicted to hit €500bn this summer. This is under a scheme called 'Target 2' which seeks to allow cross payments between backs of Eurozone members. Interestingly Germany has under the same scheme a surplus of payments of €1tn putting further pressure on strained relations between the countries. Draghi was dismissive of the significance of this but could this be storing up problems in the Eurozone for another day?
Clients looking to buy Euros with sterling are now presented with a familiar problem of struggling to make a decision. Should they hold on for a better rate or take a plunge at current levels. With the Pound losing value against all currencies and the prospect of further uncertainty ahead it appears a more defensive strategy remains the safest and most sensible way forward.
Another snap election or vote of no confidence in Theresa May will only make a bad situation worse, judging by the performance of the UK Government since the vote in June 2016, I would not be gambling on a positive outcome.
Clients looking to the Eurozone expecting problems in Italy or Greece to trigger significant Euro weakness could continue to end up disappointed. It is very difficult to see where the Pound will find any major buoyancy against the stronger Euro with so much political uncertainty hanging overhead. It appears the political issues in the UK will continue to outweigh the now largely resolved issues in Europe, clients looking to buy Euros with Pounds in the future might be best off biting the bullet and protecting what value remains.
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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