The pound trended broadly lower through June, the currency being primarily undermined by concerns over the UK’s economic trajectory.
Although German Chancellor Angela Merkel succeeded in winning a fourth term in office, her victory was unconvincing, with her party receiving the lowest level of votes since 1949.
As the Christian Democratic Union’s (CDU) usual collation partner (the Social Democratic Party) has become the opposition, Merkel was left facing the prospect of weeks of coalition negotiations.
The thought of a prolonged period of political uncertainty in the Eurozone’s largest economy left the euro unstable.
As the week continued EUR exchange rates were also pressured lower by disappointing German IFO business climate, expectations and current assessment figures, a dip in the German GfK consumer confidence index and below-forecast inflation numbers from the Eurozone.
However, weakness in the pound and upbeat German employment figures meant EUR/GBP was able to bounce back before the weekend, with the pairing recovering from £0.8750 to £0.8835.
The euro extended gains against the pound on Monday despite clashes in Catalonia between the police and voters over the region’s independence referendum.
With 90% of voters reportedly voting in favour of independence, there are concerns that Spain’s political landscape could become increasingly clouded.
Over the next few days political news may continue inspiring EUR volatility, but investors will also be looking to the week’s main European ecostats for guidance.
Of the week’s releases, the most influential include the Eurozone’s retail sales figures (out on Wednesday) and the ECB’s account of its last monetary policy meeting.
Hawkish comments from the ECB regarding the future tapering of quantitative easing could boost the euro.
Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure
Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)