Euro crises dominate sentiment

11 February, 2015

Tom Arnold

The week so far has been a relatively quiet one on the currency markets, with not a lot of key data released and as such not a vast amount of movement. The movement we have seen has been driven mainly by sentiment and ongoing issues, mainly in Europe.

The Greek situation dominates everything with the new Greek government still seeking to completely rearrange their debt plan and cancel the Troika imposed austerity measures. To be frank; they are getting nowhere with every other European body that is involved continuing to state the debt is on the longest term and at the lowest rate possible and hence cannot be changed. The situation is increasingly looking like it is heading towards disaster, with many commentators now starting to talk in realistic terms of the Greeks being forced to borrow from somewhere else – the US, China or Russia – and as a result probably leaving the Euro or even the EU.

The other news that is weighing heavily on the Euro is the increasing rhetoric and sabre rattling between Russia and the rest of the world over the Ukrainian crisis. Russia is suffering under the cosh of sanctions and critically the record low oil prices and Putin seems to be increasingly moving towards a more and more aggressive stance. Over the weekend just gone, the leaders of both Germany and France went to Russia to try and broker some kind of new peace initiative, and Angela Merkel then moved onto the US to further discuss the crisis with President Obama. The result seems to have been no change, and this is weighing heavily on the Euro, with the dominant European economy of Germany a massive trade partner of Russia’s, and hence continued sanctions and uncertainty causing severe economic concerns.

These two ongoing problems have caused the Euro to drop away further, despite the lack of day to day data of any note, and today is no different, with the only important thing happening, a meeting between the Eurogroup – all of the European finance ministers and the ECB president – to further discuss Greece.

As a Euro buyer this is a great time for you, with rates once again testing the 7+ year highs we have recently seen. Is it likely to go higher though? Possibly, there is still significant pressure on the Euro from these two crises. But, a note of caution… If you are buying your Euros from Sterling then take a look at the opinion polls ahead of the upcoming UK general election. They are currently too close to call, and a change in government, especially if it means letting in the seemingly economically incompetent Labour party, will not do the Pound any good at all. So discussing your options with your CI account manager and considering securing your Euros at the current highs could well be the best plan.