The EUR continues to make inroads against GBP, with the pair dropping to 1.1456 at yesterday morning’s low. However, despite the gains made against the Pound the EUR hasn’t performed as well against other currencies, in particular the USD, since the Brexit vote. We need to remember the negative impact the UK’s exit is set to have on the Eurozone region, which is losing one of its integral members. The EUR did manage to claw back some of these losses against the USD over recent day but the general trend for EUR sellers has been negative, apart from the gains we’ve seen against Sterling.
Whilst the current trend will not last forever, it does seem as though the Pound will struggle to make any sustainable impact against the single currency whilst there is so much market uncertainty surrounding the UK economy. With reports surfacing over the weekend that UK Prime Minister Theresa May will not look to invoke Article 50 triggering our Brexit from the EU, until possibly as late as 2019, this market uncertainty is likely to continue. I would not be surprised if we find there is a ‘glass ceiling’ type barrier created for the EUR, which the Pound could struggle to surpass over this ever growing period.
Despite this, there are also a number of key market triggers that EUR sellers should be wary of. Not least the recent stress test on Eurozone banks, which indicated that Greek & Italian banks in particular could struggle to survive if we had another global crash, similar to the one we saw in 2008. Whilst Greece has been highlighted previously as an economic danger, any collapse in the Italian banking system could have far wider reaching consequences. Talk of a domino effect is not new but this would likely be terminal for the Eurozone region and as such I would be extremely tempted to take advantage of current levels if I were holding a EUR position.
Looking ahead and we are likely to see additional volatility on Euro exchange rates this week. Following yesterday’s trade balance figures, which weren’t overly positive, investors will be looking at today’s UK unemployment figures and Thursday’s UK Retail Sales figures & Eurozone inflation data, so expect a busy few days on the exchange.
If you have a currency transfer to make and have concerns that the market could move against you, give us a call today on 01494 725 353, our brokers may be able to offer peace of mind.
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