Financial News from the Foremost Currency Group, 16th October 2017
In this week's Report:
Euro Struggles to Shrug off ECB Dovishness
Friday’s high: €1.1264
Friday’s low: €1.1195
GBP/EUR Recovers Ground amid Brexit Volatility
After slumping sharply in response to chief EU negotiator Michel Barnier’s ‘deadlock’ comment, the GBP/EUR exchange rate rallied ahead of the weekend.
Slightly more optimistic comments from other officials boosted the appeal of the Pound, raising hopes that the second phase of Brexit negotiations could still commence before Christmas.
While the two sides still appear largely at odds on a number of key issues, this was not enough to particularly dampen demand for the Pound on Friday.
Confidence in the Euro, meanwhile, remained somewhat limited thanks to the dovish nature of European Central Bank (ECB) President Mario Draghi’s latest words.
With the ECB looking set to maintain a cautious outlook for the foreseeable future, the upside potential of the single currency appears rather lacking at this juncture.
Even an unchanged finalised German consumer price index result was not enough to shore up the Euro, with signs of inflation within the Eurozone still failing to convince policymakers.
Euro Outlook: Narrowed Eurozone Trade Surplus to Limit EUR Gains
Demand for the single currency may be limited today, with forecasts pointing towards a narrowing of the Eurozone trade surplus.
Any deterioration in trade conditions could encourage further selling of the Euro, even if the surplus remains relatively large.
However, political developments are likely to remain the main influence on EUR sentiment in the near term.
If the Catalan crisis shows fresh signs of escalation then the GBP/EUR exchange rate could make further gains.
Unless the Spanish and Catalan governments can move towards a peaceful agreement, the future stability of the entire currency union could remain in question.
The Euro could find some support against the Pound as markets brace for tomorrow’s UK consumer price index, which is likely to provoke significant GBP volatility.
Should the odds of an imminent Bank of England (BoE) interest rate hike appear to weaken, the Pound could trend sharply lower against its rivals.
10:00 Eurozone Trade Balance
09:30 UK Consumer Price Index
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