Today is expected to be an exciting day for the GBP/EUR rate as the EU Unemployment Rate and Consumer Price Index are both released. The unemployment rate is expected to stay the same at 10.3% for the Eurozone, however any movement on this especially negative could see GBP/EUR rates increase. The CPI is expected to be down by 0.1% on both, anything beyond this could cause Euro weakness seeing the GBP/EUR rate jump towards 1.30.
Will Sterling Strength Continue?
If you are looking to purchase Euro’s I would suggest trying to make arrangements sooner rather than later. I think that over the weekend there is a very strong chance the newspapers will publish a lot of information for the Leave campaign after economist’s put forward a report suggesting a Brexit would be positive for the UK.
If you work on the assumption that President Barack Obama had a major effect on the currency markets supporting the Remain, it seems likely that press for the Leave campaign will cause the GBP/EUR rate to fall.
Next week there is a significant number of releases for Eurozone which will cause market volatility. I believe the rate will be around the mid 1.25’s by the end of next week, with a general downward trend as we move even closer to the Referendum.
Why the Brexit may be positive
There is disturbing news rising from down in Greece as it becomes more apparent that the situations have not improved there and the next bailout payment is going to be comfortably missed. The “administrators” are on their way back down to the south of Europe to try to cut yet another deal. Adding to the problems in Greece, it’s become clearer that Italy is also on the verge of complete meltdown as they currently own 1/3 of the whole Eurozone debt. There has already been disdain from the German Finance Minister Wolfgang Schauble who has publicly criticised Mario Draghi ECB President.
Schauble is not happy with the amount of measures the ECB have implemented in the Eurozone and the cut in interest rates have prevented German pensions from growing. Draghi has made it clear that the ECB is not only there for the German people but is mandated to manage inflation for the whole Eurozone. In my opinion there is no doubt the stronger EU economies are being held back by the troublesome economies and this will cause contention if things don’t improve. The UK arguably has an opportunity to walk away from an experiment that is slowly falling apart anyhow.