subject: Euro mood remains downbeat [print this page] Euro mood remains downbeat Euro mood remains downbeat
Despite the ECB bond purchase last week there remains an uncertainty as to how the eurozone crisis will pan out. There has even been talk Germany will leave the euro! I believe that it is currently highly unlikely Germany will leave the euro but the mere discussion of the topic shows the mood.
The Interbank level on GBPEUR nearly touched 1.20 last week, breeching a ten week high. The rate was swinging wildly with movements over well over 1% a day. Investors are still very weary of the future outlook for the euro. The ECB is being seen to act but it is not getting a full hold on the issue. The ECB bond purchase boosted the euro, as did poor unemployment figures in the US, as investors looked to profit from the volatility.
I can only see the volatility remaining in the coming weeks and the swings make it very difficult to predict where the movements will go. What does look certain is that the ECB will continue to offer piecemeal solutions. Angela Merkel has stated there are no plans and there is no desire for a joint fiscal policy' which seems to imply it is up to the individual countries to manage it's own finances. Is this a good thing considering the bad job that the peripheral states have done? Just look at the state of Greece!
When looking to the GBPEUR rate we also need to assess the impact of sterling. Revised down growth figures for the UK make me think that whilst the euro may be weakening, sterling is not necessarily best placed to capitalise.
Sterling has still made some excellent gains in the last month against the in-focus euro, but the ECB's reaction has the power to quell these. I don't think we will see any major euro weakness to push above 1.20 this year unless something drastic happens. As the bond purchase shows the ECB will react and will not just let the euro spiral out of control. Those with buying euro requirements may wish to capitalise on these gains now, should sterling suffer as it did towards the end of September.
The fluctuations we have seen lately show just how important it is to remain in contact with your currency dealer. We are currency experts working in the markets with access to live sources so let us be your eyes and ears to excellent rates on the euro, as well as many other currencies.
