Preliminary CPI figures for November were released yesterday, showing that Inflation rose by 0.6% compared to 0.5% in the previous year. The concern is that the current Quantitative Easing programme, which is due to be reviewed on 8th December, isn’t working to boost inflation as it should be, even though a minor improvement was noted yesterday. If the ECB decide to extend the QE programme, which is looking almost certain, this would likely cause further Euro weakness and GBP/EUR rates could well be back in the 1.20’s.
The Euro weakened against Sterling throughout the course of the day following from a host of positive US data, after investors moved their funds out of the Euro and into the USD, in preparation for the likely US interest rate hike on 14th December.
Although the spot light has been on the UK and its Brexit decision for some time now, there are now many factors which could negatively impact the Euro in the near future. The Italian referendum will be taking place on Sunday 4th December, where citizens will vote on whether or not to change Italy’s constitution. Prime Minister Matteo Renzi has stated that he will step down from his position if the public reject his proposed constitutional reforms. This could allow 5 Star Movement, a far right political party whose main stance is to call a referendum to leave the EU, to gain power. The polls had this split at 53.5% voting for vs 46.5% voting against, so a relatively even divide – and if this follows the trend of protest votes so far seen throughout 2016, this could be a very strong possibility.
All this, combined with French, German and Dutch elections next year could provide the Euro with some turbulent times ahead. If you have a currency requirement over the coming weeks or months, it would be strongly advised to put a plan in place with your Account Manager here, so that they can help you to maximise your transfer for the best possible return.
Political events this year and next could cripple the Euro presenting opportunities for EUR buyers. Euro sellers may also benefit from getting in touch with their dedicated broker to mitigate risk. Feel free to call our trading floor on 01494 725 353 or email me here.
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