The Euro is coming under increasing pressure as economic & political tensions continue to build across the region.
The Euros value has fallen against both the Pound & US Dollar over recent days but the question I’m being asked by clients is whether this negative trend is likely to continue? My feeling for some time, has been that clients holding the single currency should be looking to protect the value against the US Dollar and take advantage of the highs we’ve seen against Sterling in recent months.
The Euro moved to near three year highs against the Pound but this was more likely due to the on-going uncertainty surround the UK’s Brexit and the negative effect this has had on our economy. This in turn has handicapped any major advances for the Pound, which has inadvertently helped to support the Euro, despite concerns about the future of the EU and the political landscape over the coming months.
With key elections in France, Germany and the Netherlands and support for far right parties in each of these countries, it is clear that all is not well inside in the EU. As the UK’s unexpected decision to leave the EU has proved, along with the appointment of President Trump, the expected result does not always come to fruition and it is clear that some people are searching for change.
Any uprising across Europe is likely to sap investor confidence in the single currency further and the current rates against the Pound in particular, could look extremely attractive in months to come.
This view is even more poignant when you consider developments in Greece last week, who once again are coming under the spotlight due to fears they simply cannot service their ever growing debt repayments. As such they may have no choice but to leave the EU further down the line, news which would likely send shock-waves through the market.
With so many negative variables, along with economic instability and uncertainty across the region, I would simply not be prepared to gamble on a major spike for the Euro against the Pound.
Despite the fact that the triggering of Article 50 may continue to negatively affect the UK, I believe the problems facing the Eurozone are greater and as such I would be looking to protect any Euro positions sooner rather than later.
Looking ahead and there is some key economic data for those clients with a Euro requirement to look out for.
This morning we have the latest Eurozone Gross Domestic (GDP) figures released at 10am. The expected figure of 0.5% growth has likely been priced into the current rates, so any deviation from this and expect increased volatility for the Euro. There is also Industrial Production figures out so I expect a busy day for any clients holding the single currency.
Wednesday we have Trade Balance figures, followed by the European Central Bank (ECB) Monetary Policy Meeting Accounts on Thursday. We finish the week with Construction data on Friday, so expect increased volatility for the single currency this week.
The Eurozone faces huge hurdles throughout 2017, and clients with a Euro buying or selling requirement have the opportunity to protect themselves from huge fluctuations in the market. Speak to a member of our team on 01494 725 353 regarding a forward contract, alternatively you can email me at email@example.com.
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