Euro strength seems likely to persist but cracks may easily emerge
A key question for any client looking to buy Euros is when will the Euro weaken? Troubling for any client buying Euros is economic might of the Eurozone economy which has been growing and really appears to have turned a major corner after many distressing years with concerns over debt.
With the US Federal Reserve and the Bank of England on course to be raising their interest rates further, and the European Central Bank, ECB currently stuck at negative rates, the prospect for a weaker Euro against these currencies seems a matter of when, not if. A further factor toweaken the Euro would also be the prospect of debt problems resurfacing. Italy and Greece are still majorly indebted which could easily trigger a loss of confidence in the single currency in the future.
When will Eurozone debt issues resurface?
This is a very difficult call, the market is a strange beast. Sometimes, it all comes down to perception and sentiments. With Mario Draghi, President of the ECB suggesting he will ‘do whatever it takes’ to save the Euro, there remains an important backstop to further future weakness. Nevertheless these issues could easily resurface at any time, Greece’s debt is still 180% of GDP, Italian debt is 132% of GDP. As a guide UK debt is 88% of GDP and German debt 61%. Italy also owes the ECB €500 bn as part of various loans, these are not small numbers!
At present the Euro is performing well against its counterparts compared to some historical levels. GBPEUR had spent most of 2000-2007 in the 1.40’s before the financial crisis took us to 1.03 for the beginning of 2009. The average thereafter has been just over 1.20 with lows of 1.16 rising to highs of 1.44 from 2013 to 2016.
The Euro is buoyant against most currencies presenting a very good historical time to be selling for another currency. There is not a huge amount of economic data this week from the Euro but some key UK and US releases which could impact GBPEUR levels.
If you need to buy or sell Euros and wish to discuss any strategy to maximise a deal further, please contact me Jonny on firstname.lastname@example.org.
Thank you for reading and I look forward to hearing from you.