The Euro has come under pressure of late over expectations of what the European Central Bank will do in terms of tapering its asset purchasing scheme. The ECB have been widely expected to come to an end of its asset purchasing scheme later this year and this has contributed to its overall strength.
However it was shown last week that EU inflation is still struggling to climb higher and this is of concern to the European Central Bank. The ultimate goal of the central bank’s asset purchasing scheme was to boost economic growth and to see inflation climb to a target of around 2%. The fact that inflation remains low could mean the ECB has to tweak its policy and this could mean Euro weakness.
The third round of Brexit negotiations are expected to start this week and this in my view should continue to be a major market mover. This final round of negotiations are expected to be the toughest and any signs of a no deal scenario are likely to be seen as very negative for the pound. The prospect of going on to World Trade Organisation rules as a back stop creates uncertainty in the markets and this is likely to see major volatility if no agreement is reached. Any comments of cherry picking or talk of a no deal scenario are likely to see considerable weakness for sterling exchange rates. Those clients looking to sell Euro who have been caught out by the sudden rise in the price of sterling could see some better opportunities around the corner.
UK political developments over Syria are also likely to have an impact on the price of sterling. For the moment the markets have largely shrugged off the decision by Theresa May to launch a strike against a chemical factory in Syria and Prime Minister Theresa may was not dented at the marathon questions session in parliament yesterday.
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