With the currency markets moving every two seconds, it can be vitally important to be aware of what is driving the currencies in or out of your favour. The below table displays the difference in Euros you would have achieved when buying £200,000 over the past month.
|Currency Pair||% Change||Difference on £200,000|
In the lead up to the Brexit vote just over 1-year ago now, much of the warnings from the ‘Remain’ camp were along the lines of business moving out of the UK should we decide to vote in favour of leaving the EU.
The past week has shown us that these warnings were more than just empty threats, as in the last week the EU has officially begin relocating London based EU agencies such as the EMA (European Medicines Agency) and the EBA (European Banking Authority). This is bound to result in UK job losses as well as lost revenue, which could push the Pound lower if further business is to follow suit.
To add to this loss, the topic of Euro clearing is rising to the surface much to the concerns of the financial sector within the UK.
London is the world leader of clearing all types of currency-denominated derivatives and financial products. Clearing is where a third-party organisation acts as a middleman for buyers and sellers of financial contracts tied to the underlying value of a share, index or bond.
This industry accounts for thousands of jobs and the European Central Bank has put forward a proposal to boost its oversight of Euro clearing, with the ECB hoping to obtain a significantly enhanced role in the lucrative market.
I expect to see the Euro continue to climb in light of these plans, and I wouldn’t be surprised to see the GBP/EUR rate continue to test its lower support levels in the upcoming short-term future, especially if the pattern of the EU gaining business at the expense of the UK continues.
From a longer-term perspective, we could see the Euro fall if other nations appear to wish to follow in the UK’s footsteps and leave the 27-member trading bloc.
According to recent Chatham House report, 55% of the EU nationals surveyed think another country will leave the EU within the next decade, and 54% said that their country felt like a better place to live 20 years ago.
There are also issues with a number of Eastern European members of the EU not wishing to comply with certain guidelines set out by the EU, and with youth unemployment in economies such as Greece, Spain and Italy all over 30% I think there is scope for other nations to follow in the UK’s footsteps which would likely result in Euro weakness. I guess many will wait to see how the UK fares first.
The first potential market mover this week begins this afternoon, when ECB president Mario Draghi will be giving a speech focusing on the youth policies within the EU.
On Thursday German inflation data could move the markets along with German unemployment data scheduled for release on Friday morning, just before the inflation data for the Eurozone as a whole is released. If you would like to be kept updated regarding these events, do feel free to get in touch.
Thank you for reading my Euro currency report, if you have any questions about exchange rates I would be more than happy to discuss them – you can contact me with any queries here.
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