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Concerns over Global Trade Predicted to Limit Euro Demand

Last week’s high: €1.1264

Last week’s low: €1.1154

Mixed ECB Message Prompted Sharp Moves for Euro

Euro exchange rates saw some sharp gains in the immediate wake of the European Central Bank’s (ECB) March policy announcement.

Although the move was not entirely unexpected, investors were still pleased to find that policymakers had opted to drop the explicit easing bias from their latest statement.

This suggests that the central bank is shifting in a slightly more hawkish direction, albeit at a rather slow pace.

However, the GBP/EUR exchange rate was soon able to recover some of its losses thanks to comments from ECB President Mario Draghi.

As Draghi talked down the implications of the change in statement, indicating that it was a backward-looking move, the appeal of the Euro diminished.

The single currency came under further pressure ahead of the weekend as Germany’s latest raft of trade data fell short of forecast.

A surprise contraction in export volumes does not bode well for the economy, given general market concerns over the prospect of a potentially imminent trade war.

Euro Outlook: Brexit and Political Worries to Return to Focus This Week

Major economic data will be a little thinner on the ground this week, leaving the GBP/EUR exchange rate more vulnerable to political developments.

Worries over the future of the Italian government may well weigh on the Euro in the coming days, with investors still discouraged by the increased influence of anti-EU populist parties.

On the other hand, developments surrounding Brexit could keep the Pound on a generally weaker footing.

Unless there are signs of progress on key issues in the near future the GBP/EUR exchange rate could struggle to make any particular headway.

Even so, any weakening in January’s Eurozone industrial production figures may dent the Euro, especially if global trade war fears flare up further.

Key Events

14th March

10:00   Eurozone Industrial Production

16th March

07:00   German Wholesale Price Index

10:00   Eurozone Inflation Rate

Alastair Archbold

Currency Trader

Tel: 01442 892 066

 

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