Euro stumbles as attention turns to European political risks

  • Retour à la page d'accueil du Blog
  • Actualités
    Actualités|Analyse du marché des devises
    Actualités|Analyse du marché des devises|Commerce international
    Actualités|Analyse du marché des devises|Commerce international|Innovation
    Analyse du marché des devises
    Analyse du marché des devises|Commerce international
  • Latest

7 February 2017

Written by
Matthew Ryan

Senior Market Analyst at Ebury. Providing expert currency analysis so small and mid-sized businesses can effectively navigate international markets.

In a relatively quiet start to the trading week, the Euro dipped slightly against the US Dollar on Monday, with investors turning their attention to the heightening political risks in Europe.

F
ocus over the weekend was firmly on the upcoming Presidential elections in France. Far right and anti-EU National Front leader Marine Le Pen has gained ground on her competitors following the dramatic wane in support for former favourite Francois Fillon, plagued by a fake-job scandal that has significantly damaged his campaign.

Le Pen, who has been vocal in her support to remove France from the Euro, and is expected to make it through to the second round with many bookmakers now giving her slightly more than a one-in-three chance of winning. France will go to the polls in its first round of elections in April with the run-off to take place in May should no candidate win a majority.

In the UK, the Pound slumped to a 2 week low against the US Dollar this morning on broad Dollar strength. Monday saw the beginning of a three day debate on the law giving UK Prime Minister Theresa May the right to trigger Britain’s formal EU exit process. Any signs of conflict in discussions could create downward pressure on Sterling this week, although we expect the debate to be fairly non-eventful.

This week will be a slightly more non-eventful one in terms of economic announcements, with political news set to take centre stage.

Major currencies in detail

GBP

Sterling fell 0.7% against the US Dollar this morning off the back of broad US Dollar strength.

MP’s begun debating the first group of amendments to Parliament’s bill on the triggering of Article 50 on Monday. The amendments largely dealt with parliamentary scrutiny and the rights of EU citizens in the UK. Some amendments, such as a clause guaranteeing residence rights for EU nationals, will be put to a vote on Wednesday. However, we see no real stumbling blocks to the process, and believe we are still more likely than not to see the triggering of Article 50 before the end of next month.

Halifax house prices this morning are unlikely to be of significant interest to Sterling traders this morning with attention on this week’s Brexit debate.

EUR

Political uncertainty weighed on the common currency on Monday, with the Euro trading around 1% lower against the US Dollar this morning from Friday’s close.

President of the European Central Bank Mario Draghi continued to stand by his dovish monetary policy stance yesterday while speaking at the European Parliament in Brussels. Draghi claimed that monetary stimulus was still required in the Eurozone in order to support the area’s economic recovery, despite the recent spike in inflation that was driven largely by an increase in oil prices.

Meanwhile, the latest investor confidence data from Sentix came in right in line with expectations. The index fell to 17.4 this month from 18.2, despite the broad improvement in economic conditions in the Euro-area.

German industrial production data this morning is unlikely to shift the Euro, with political factors the main driving force this week.

USD

The US Dollar index rose back above 100 yesterday, erasing much of its losses that have seen the currency slump by almost 4% since the beginning of January.

Economic news was scarce on Monday, with the Labour Market Conditions Survey from the Federal Reserve the only major release. The index rose back into positive in January to 1.3 from -0.3, continuing to highlight the broad labour market strength that we think should convince the Federal Reserve to hike interest rates on multiple occasions this year.

Today will be thin on the ground in terms of economic announcements in the US, with the Dollar likely to be driven by underlying factors.

PARTAGER