- Inflation remains stagnant for 2 years
- Deutsche Bank shares fall 7.5% amid fears of a bailout
- Drawn out Brexit plans will hurt the Eurozone – Mario Dragi states
GBPEUR falls following Brexit but for how long?
There is no doubt that the UK has a challenge ahead in assuring that Brexit plans benefit both the economy and those that opted to leave the single market. And with that could bring further weakness for Sterling as we approach the invocation of Article 50.
But for what its worth, the UK is not performing too badly following the historic vote and according to Mathias Döpfner, Chief executive of German media outlet Axel Springer, the UK could well be in a better position 5 years from now.
This of course, does depend on a number of factors, and with chinks in the EU armor beginning to show, could the UK recover from its post-Brexit lows sooner than anticipated?
Is the Euro overvalued?
The Eurozone remains somewhat resilient to economic downfall, an almost unlimited supply of QE from the ECB gives the Eurozone plenty of scope to address economic concerns at its disposal. We’ve witnessed this for many years with the likes of Greece, Spain and Portugal all needing bailouts in some form. And with inflation almost stagnant for over 2 years its not difficult to see why the Eurozone is making little progress in stabilising its inflation.
On the left we have Germany, France and even the UK offering a net contribution towards the EU. Whilst on the right, many of its EU members taking more from the pot than it puts in. What we have is stronger economies being pulled under and negatively impacted by low interest rates.
And what can be said for the latest news from Germany? Deutsche Bank may deny concerns that its bank is struggling but a $14bn payout to the US is a huge loss for any organisation. Is it just a coincidence that they happened to sell their British Insurance firm Abbey life for $1.2bn?
Draghi’s speech to impact GBPEUR exchange rates
Mario Draghi will address his latest report in Germany today with Brexit likely to be on the main agenda. He has remained incredibly bullish as of late, pushing Brexit woes to one side. The Eurozone has made no progress in lifting its low inflation and with a QE programme held at €80bn a month, there is little reason to believe such measures are working.
What can the ECB do when a majority of its EU members are struggling economies? There is only so much a central bank can do to encourage spending, a point Mario Draghi has made many times previous. His comments earlier this week on drawn out Brexit plans is yet another reason to be nervous about the Eurozone, there is little doubt that any sensible Brexit plans will be rushed prior to the European elections next year.