The GBP/EUR exchange rate dropped into the 1.12’s today for the second time in a week following the UK Election. The last time the rate was at this level was after the surprise Referendum result to leave the EU in June 2016. Two votes in 1 year have gone against Sterling and the exchange rate is finally showing the full effect of the uncertainty that has been created. There will be Brexit negotiations starting this June and if those get off to a bad start then we could fall below 1.10.
Busy week of EU data
Wednesday we will see Consumer Price Index data for Germany and the EU. This will provide an indication into the inflation levels across the Eurozone. I would not be surprised to see good readings as there has been a whole flurry of strong EU data of late.
The big question will remain whether positive readings will encourage Mario Draghi, President of the European Central Bank, to consider tapering the fiscal measures and eventually raise interest rates. Whilst this could be a far-fetched, early stage plan, several of the high performing nations in the Eurozone will hope to see this. An interest rate rise in Europe in my opinion could see the GBP/EUR fall by at least 5 cents.
There will also be Industrial Production data for the EU and Employment change readings which could provide a whole string of good readings across the board. Over the rest of this week, whilst Theresa May negotiates a hung Parliament the GBP/EUR rate could start to really suffer.