Monthly Wrap: EUR – Euro mixed as gloomy data and political uncertainty drags

Key takeaways:
–              Eurozone data continues to disappoint.
–              European elections prompt uncertainty.
–              EUR Monthly lows: £0.85, $1.11, AU$1.59, NZ$1.68, C$1.49
–              EUR Monthly highs: £0.88, $1.12, AU$1.62, NZ$1.71, C$1.51
 
Trade in the euro proved mixed in May as some lacklustre economic data and rising political uncertainty in the Eurozone limited the appeal of the single currency.

On the data front, EUR exchange rates were pressured by the ongoing contraction in the Eurozone’s private sector as well as some worrying industrial data out of Germany.

The lacklustre data continued to spark concerns over the health of the Eurozone economy – something that was further fuelled by the European Central Bank’s warnings that downside risks to the bloc were on the rise.

Meanwhile last month’s European elections also negatively influenced EUR sentiment, with analysts warning that an eroding of the pro-EU bloc in European Parliament could water down plans for further Eurozone integration.

Despite all this the euro was able to trade fairly robustly last month thanks to the weakness of its peers. 

So far in June we have seen Italy’s debt drama come to the fore again as the European Commission threatens to launch disciplinary procedures against the country in response to Rome’s refusal to abide by EU fiscal rules.

We have also seen the ECB conclude its latest policy meeting, with the bank indicating that interest rates are likely to remain on hold for longer, but it still helped to boost the euro as it revised its Inflation forecast for 2019 upwards.

Looking ahead to the remainder of the month, movement in the euro is likely to be driven by economic data, with the single currency likely to face some headwinds if the latest releases continue to point towards a slowing Eurozone.