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In line with the recent trend it was a positive start to the week for those looking to buy euros with the pound, as rates continued where they left off before the weekend and climbed from 1.1750 to the highest levels we have seen this year, flirting with 1.18.
Although not a major move in the session due to a lack of data, it could be an indication that there is a change in focus of market participants, as issues in Europe are beginning to share the headlines with our own European story.
GBP/EUR 36-hour exchange rate graph
Troubles in Europe?
With the encroaching elections for some of Europe’s major players, it is nervous times for both those investing in the bloc, as well as those doing their grandest to try and hold the whole thing together.
The first test will be the Dutch elections in only a months’ time, which are expected to show a continued rise of the far-right Party for Freedom (PVV). It is no secret that many Dutch nationals have strong reservations about being a member of the EU, and this could result in some severe political battles as they potentially attempt to create a functioning coalition.
Not long after focus will be on France, and who will be taking up residence in the Palace Élysée. Again it is the far right that are making headway and headlines, but many commentators are still of the belief that success in the first round of the elections is unlikely to lead to Marine LePen and her party taking control. However we don’t need reminding of how much impact momentum can have on these proceedings, so it could prove a foolish move to right her off.
In the nearer term however it is the re-emergence of the Greek debt crisis that is seemingly an important contributing factor. The International Monetary Fund (IMF) are outwardly getting fed-up with the lack of transparency and attempts to render over the cracks, and they are becoming increasingly blunt in their approach. In the IMF’s most recent review they stated “public debt has reached 179 per cent [of gross domestic product] at end-2015, and is unsustainable”. With the Trump administrations representatives soon to join the organisation, the climate is looking to get more hostile for the Greeks, and the IMF’s removal from whole situation may be immanent, leaving it to be managed (or miss-managed) by Europe itself. With the Germans participation conditional on IMF involvement, their removal would leave only 2 options. Greece defaults on its debt come the summer and is forced to quite the Eurozone, or the Germans accept they must offer debt relief, and in turn do so on the approach to their own domestic elections, which would cause considerable political pain.
Remember it was only 7 days ago that we were witnessing mid-market levels of 1.1570, and not even a month ago we were a few percent below that, and closer to 1.10 than we were 1.20. So as these plot lines begin to emerge, there is potential for significant movement in either direction. The days of 1.25+ I believe are well out of reach for the foreseeable future, where as a return to 1.10 could become a reality.
Get in touch
With all these factors to consider, having not even mentioned Brexit, it has rarely been a more crucial time to have an expert opinion on your side, and another set of eyes and ears to the market to warn of impending news that could affect your transfer. Once you have made contact with us here at Foremost Currency Group, you will be assigned a dedicated account manager who will be your sole point of contact throughout the entire process and beyond. With a range of contract types available we will work closely with you to understand your requirements, so that we can look to put a bespoke strategy in place to help maximise your return.
It is a busy data for data today. With Inflation figures for the UK released at 0930 this morning, and preliminary Eurozone GDP only 30 minutes later, there is potential for significant movement on GBP/EUR. From across the pond we have US PPI which are expected to have little impact on USD crosses.
T: +44 (0) 1442 892063