Italians put the Euro under pressure

5 December, 2016

Tom Arnold

Last week was similar to the previous couple of weeks on the currency markets, with the Pound making gains at the expense of both of the other major currencies, thanks to weakness on their part and some backing as a result of the unfolding Brexit situation.

Last week’s OPEC meeting put the Dollar under pressure and some of the post-election positivity started to wain, allowing Sterling to make a couple of cents worth of gains by the end of the trading week.

In Europe the pressure came thanks to fears over what might happen in the Italian constitutional referendum over the weekend and these fears have proven to be well founded with the “No vote” winning comfortably in the end. Italian Prime Minister Renzi has already resigned and the scare mongers are out again, suggesting this could be the second step (after Brexit) of the break-up of the EU. The Euro lost quite a bit of ground thanks to the pre-referendum fear and hence pricing in, and so we have not seen a massive move this morning, but we can expect some pressure to come on the Euro, as the fall out of this vote unfolds.

The week ahead is a busy one, with all of the below data due to be digested by the market. In addition to this we have the Supreme Court hearing the Governments appeal against the High Court decision about parliament needing a vote on triggering Article 50. Some of the Sterling strength we have seen recently has come thanks to pricing in on this hearing – the point of law seems pretty clear, so the decision to appeal is largely seen as posturing by the government with no real chance of success, and as we know from the original High Court decision this delay to Article 50 is largely Sterling positive.

German Services PMI
European Services PMI
European Retail Sales
US Services PMI

Australian Interest Rate Decision
European GDP
US Trade Balance

Australian GDP
German Industrial Production
UK Manufacturing Production
UK Industrial Production
Canadian Interest Rate Decision

European Interest Rate Decision + Statement
US Jobless Claims

German Trade Balance
UK Consumer Inflation Expectations

For those of you with a currency requirement coming up and Sterling in hand, the current situation is relatively positive – Pound on the front foot, Brexit delayed, Euro on the ropes and even the previously irrepressible Dollar struggling. But it would be foolish to think everything is suddenly rosy – Brexit is still coming, and a couple of delays here or there are not going to derail this, and hence the Pound will come under more and significant pressure. The Italians have not voted for Italexit, they have just voted for a change in Prime Minister. And once the new US president is in place and the hand is firmly on the tiler, we can expect the Dollar to come again.

Make sure you stay in close contact with your Currency Index account manager to be kept informed of exactly what is happening, what your options are and how you can take advantage of this improvement in rates, even if you do not require your currency for some time to come.