Halo Financial a leading foreign exchange brokerage and specialist foreign exchange service provider released it's Euro Research report
Strong economy doesn’t translate to a strong Euro
While the economic results for the Eurozone appear to be largely positive – beating forecasts and continuing to demonstrate growth – the pace of growth has slowed recently. Key economies for the Eurozone, France and Germany, continue to perform strongly. However, cost pressures continue to grow across key economic sectors, as energy prices increase and the cost of goods goes up.
The Euro appears to be vulnerable to economic shocks and global economic announcements in the current climate. Mario Draghi’s opening comments at the European Central Bank (ECB) Forum on Banking Supervision on 7th November skimmed over monetary policy and focused on the European banking sector, disappointing markets and weakening the Euro. This was exacerbated by falling German Industrial Production figures for September 2017, pushing the Euro down against the US Dollar, in particular. Despite broadly impressive economic growth for the Eurozone, the Euro is still underperforming against the US Dollar and this is likely to continue for the short-term, although the situation is likely to improve in the coming months.
Sterling recovering slowly
Sterling is rebounding after a steep fall following the Bank of England’s (BoE) dovish November meeting. Despite interest rates going up, BoE Governor, Mark Carney, announced the bank’s forecast of only two small rate rises expected over the next three years, which sent Sterling into a temporary spiral. If the Pound picks up further, this could add additional pressure to the Euro, which appears to be facing pressure from a number of areas.
The Bank of England (BoE) has raised interest rates for the first time since July 2007 to 0.5%, forecasting two more rate hikes over the next three years.
David Johnson, founding director of Halo Financial, commented, “The Bank of England’s 25 basis point interest rate hike was so widely expected that the announcements were something of an anti-climax. What wasn’t expected was the statement that the BoE saw no more than two further 0.25% hikes in the next three years. That rather dovish view saw Sterling, which had gained half a cent against the Euro in the seconds after the announcement, dive by a full cent in the following 30 seconds.
You can see the report here