Thursday this week sees the latest European Central Bank (ECB) meeting which is likely to attract increased market attention. The last Central Bank policy decision saw increased market volatility as investors reacted to the ECB commentary that the recent economic slowdown was not temporary as they first believed.
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Thursday might see further questions of the single bloc’s monetary policy makers and their future expectations. The tone and sentiment, which was quite positive entering 2019 in forecasting future interest rate hikes, might need further scaling back given the recent shift in economic news.
Eurozone growth was 0.2% in the final quarter of 2018 and Germany narrowly avoided a recession, whilst Italy has been confirmed to be in a recession.
Tomorrow we will see the release of Eurozone Retail Sales which will provide some further insight into the health of the single bloc, as well as Gross Domestic Product (GDP) data due on Thursday before the ECB interest rate decision.
Other issues to be conscious of are the ongoing political concerns across the region, with rising anti-EU sentiment reflected in more populist movements gaining support. European elections are due in May and there are increasing concerns this shift in sentiment will find great political representation, which will only ask greater questions of the Eurozone and what the future holds for the currency.
The pound finally broke free of its recent ranges against the euro, rallying last week to a 2-year high. Optimism over the diminished chance of a no-deal helped fuel a spike in the pound reminding us all how sensitive sterling to euro rates are when it comes to Brexit news.
Whilst political factors are key, the economic news on both currencies is not making analysis any easier, sterling could easily fall slightly earlier this week before rising against a weaker euro towards the end of the week. So long as the UK is not headed for no-deal, I would expect GBPEUR levels to rise once we know more about exactly what kind of Brexit is happening and when.
The answers to these questions could be provided very soon but until then, GBPEUR is likely to remain jittery, and any clients looking to buy or sell euros should remain vigilant over the continuously changing outlook, the path ahead is far from straightforward.
If you have a transfer involving the pound or euro, why not speak to us today about the best strategy in these historic times.
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