- German Consumer price figures
- Euro GDP released tomorrow
- Banking stress tests could expose Italy’s banking crisis
Current GBPEUR levels of 1.19 could be tested by the end of the trading week. German CPI figures released this afternoon could spell a negative downtrend for the Euro given the Brexit hangover and poor manufacturing output earlier this month.
Germany is the biggest net contributor to the EU ahead of France and the UK. The decision for the UK to leave the EU puts further strain on the remaining economies to perform, the release this afternoon will be scrutinised as investors gauge the mood of the economy post-Brexit.
Tomorrow’s GDP figures could cause volatility
Tomorrow’s GDP for the Eurozone could create a stir given the UK’s positive release yesterday. Prior to the referendum vote the UK outperformed expectations for growth despite looming Brexit fears. Tomorrow’s figures like the UK’s, provide insights into the mood of the economy prior to Brexit. However, if figures come out weak tomorrow concerns then begin to build for the next release which will include post-Brexit data.
Banking stress tests – how could they impact the Euro?
The banking stress tests on Friday afternoon will involve putting banks through scenarios to ensure they have funds available in the event people decide to pull their funds out. These tests could expose how vulnerable banks in Europe are and may require the ECB to take action independent of the Brexit outcome.
Given the issues with the Italian banks, I expect these tests to cause quite a stir which could strengthen GBPEUR exchange rates. Those looking to buy Euros with Sterling may want to do so ahead of the Bank of England’s interest rate decision. In the event an interest rate cut occurs, exchange rates could fall to the mid-teens.
