Whilst there is no crystal ball to give us a definitive answer to this question, the current market trends and short to medium-term forecasts could certainly give us an insight into how to proceed.
Looking at the current market it is obvious that the Euro is not being as well supported as it was only a few weeks ago. There are many factors that influence the fluctuations in exchange rates but investor confidence is what drives a particular currency’s value, with outside variables such as economic and political conditions the driving force behind this.
What we’ve seen over the past few weeks is a shift in market conditions due to investors becoming concerned about the Eurozone economy and how it will evolve as we move into 2017. The catalyst for this could be attributed to the Italian referendum and the political unrest the resignation of former Prime Minster Matteo Renzi caused. This has set the tone for a wider concern of how the Eurozone will move forward as a single entity, with so much unrest across the region.
The Italian banking system is in a crisis which when coupled with political elections in France and Germany next year is likely to add further uncertainty to the markets and we could see the Euro’s value fall further in 2017.
The Pound has gained over five cents against the Euro in recent weeks, with the pair hitting 1.20. Although the Euro has found support it won’t take much to see these levels breached again. This is even more poignant when you consider yesterday’s devastating events in Germany and the negative knock on effect this may have on the region and the currency.
Personally, I would not gamble on another major spike for the Euro under the current market conditions and it may now be time to sell your Euro position and take advantage of the fact the Euro remains over eight cents higher against the Pound post-Brexit.
However, this does not mean the Pound will have an easy ride with the on-going Brexit debacle likely to drive market sentiment for months to come. I feel that the Pound has now found a foothold and as such a return to the highs of a few weeks seems an unlikely scenario for those clients holding the single currency. When looking at EUR/USD rates things appear a lot clearer as the USD has continued to go from strength to strength over recent weeks. The US FED’s decision to raise interest rates last week has only solidified the US Dollar’s position and Euro sellers may look at the current rates favourably next year if the current market trend continues.
I would be extremely tempted to eliminate the current risk factor and look to sell Euros prior to Christmas and not gamble on this extremely unpredictable and unstable market.
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