Euro Under Pressure Due To Inflation And Unemployment Concerns

Brexit vote

The Euro has been slipping today after Spanish data disapointed and German jobs news could not provide the necessary boost as the unemployment rate sat at 6.8%.  We have German inflation data out this afternoon so this will be closely watched as if this is poor, then there will likely be a very weak showing from the overall European figures tomorrow.  Combined with the EU unemployment published tomorrow this could see the Euro fall sharply as markets price in the prospect of action by the European Central Bank next week.  The current rate is 12% and is forecast to stay the same but any increase would be hugely damaging.

Low inflation is one of the reasons the ECB had to cut interest rates in November last year to record lows, and the forecast by Draghi was that inflation would be low for the next 2 years and interest rates would remain at current, or lower levels, for the time being.  At the last meeting he also said the ECB were considering all tools available to them, so their hand may be forced next week if the situation doesn’t improve.

If the data is bad then I would prepare to move fairly quickly as I suspect the markets will quickly price in the prospect of action by the ECB into current exchange rates so be prepared for rapid changes.  Add to this a speech by Janet Yellen stateside about which direction US monetary policy will take and you soon get the idea that it is a very complicated number of factors that may move sterling euro rates.  If you have a requirement to buy or sell Euros and would like some assistance then feel free to call 01494 787 478 or email Colm at [email protected]