European Elections could hurt the Euro (Daniel Johnson

Poor Data causes Euro Weakness

The Euro has lost value of late due to GDP and inflation data from Spain and Germany coming in  below expectations which will cause investors to remain cautious as we move into 2019. It will be interesting to see if this filters through to the Eurozone’s Consumer Price Index (CPI) figures this Friday. CPI is a key measure of inflation and can influence monetary policy, investors keep a keen eye on the release to take advantage of any market volatility. If investors are to regain confidence we will need to see an increase in inflation which has historically been a problem in the Eurozone. The European Central Bank (ECB) has vowed to conclude Quantitative Easing (QE) and how this will effect inflation is yet to be seen.

European Elections 2019

Looking slightly longer term, the European elections are due to commence in May and could have a significant influence on Euro value in Q1 and Q2 of 2019. There is currently a push for independence from Catalonia, Matteo Salvini’s anti- EU party are growing in popularity and with protests on a fuel price increase in France it is difficult to visualise the EU will have an easy ride as many deemed they have since the 70s.

There are divisions at the highest level and this will mean passing legalisation will be more difficult than ever. With so many viewpoints at polar opposites this does not bode well for the Euro.

Reforms such as the European banking reform peddled by Macron and Merkel has been behind some of the gains made by the Euro since 2017. Reforms such as this will difficult to pass now populist leaders such as Salvini will be in higher position than before. This could cause Euro weakness.

If it were not for the Brexit debacle I think we would be witnessing the pound strengthen over the Euro, however Brexit remains the key driver. May has already begun making contingency plans for a no deal scenario. A no deal scenario would certainly hurt the Pound. We have seen Sterling rally a cent against the Euro however after Liam Fox stated there is a 50/50 chance that Brexit will not happen at all.

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