This morning Mario Draghi (President of the European Central Bank), speaking ahead of his Jackson Hole Symposium speech at the end of the week, helped the GBP/EUR exchange rate drop below the 1.09 level. Mr Draghi is notorious for driving the rate down and this morning was no different to previous speeches. When Mr Draghi comes to speak in the US on Friday there could be even more positive movement once again for Euro.
Strong German data piles pressure on the Pound
In a opposing view shown in the recent German ZEW data, this morning’s Eurozone data, especially for Germany suggests their economy is set to continue to grow over the coming months with confidence at a record high. German Purchasing Managers Index across both services and manufacturing came in better than expected. Furthermore the reading across the whole of the Eurozone is also up, providing optimism for the near future.
If there is continued growth for the Eurozone and Germany then investors are going to keep putting their money into the single currency. There are still concerns with Italy and Greece as they own well over half of the whole continents debt, however these issues seem to have been swept under the rug… for now.
Where next for GBP/EUR rates?
Over the next few weeks I think there is evidence to suggest that the GBP/EUR rate has more chance of falling further than gaining. However, I believe until the level reaches 1.07 there will be downward movement, but anything lower than that currently seems unlikely. There has been some talk of GBP/EUR reaching parity in 2018 from some of the major investment banks, but there have been predictions that extreme many a time over the past year with little fruition.
The consequences for the Eurozone on trade could be quite extreme should the rate continue to fall, so you may actually see Mario Draghi try to actively weaken the Euro in the near-future.