The Euro has given up some of its recent gains against both the pound and the US dollar over the course of the week. Both currency pairs have seen very little volatility with the price ranges contained within one and a half cents.
The week started off reasonably positive for the Eurozone with Germany’s manufacturers reporting uplift in new order activity, up 1.9% in March from the month before.
The single currency’s fortunes seem to ignore the ongoing Greek debt burden concerns which are never far from headline news. The current impasse sees the International Monetary Fund look for firm evidence of Greek reform measures having been imposed, without such progress the IMF will remain reluctant to agree access to much needed bailout funding leaving the possibility for further snap Greek elections in the near future a distinct possibility. A Greek debt default is unlikely as no EU finance minister will countenance such an outcome especially at a time when the UK EU referendum vote draws near.
The single currency drift lower towards 1.13 versus the US dollar as European Union gross domestic product for quarter one was revised to 0.5% form an earlier estimate of 0.6%. It had touched a peak of $1.1447 earlier in the week.
Sterling has remained resilient despite the continuing weaker economic data releases seen over the week.
The release of UK manufacturing production this week saw further evidence that the march of the makers has been totally derailed. Manufacturing production was done 0.4% between quarter 4 2015 and quarter 1 this year.
Manufacturing production is now 10% lower than the level reached in the pre credit crunch period in quarter 1 2008, and is now officially back in recession.
There was no surprised form the bank of England as the Monetary Policy Committee voted unanimously to leave the base rate unchanged at 0.5%. The current quantitative easing measures were also left unaltered at £375 billion.
Mark Carney delivered his most telling assessment yet that should the UK’s population decide to vote to leave the European Union, UK growth would be materially lower with higher inflation.
Whilst this view from Carney is nothing new, his reiteration with only six weeks left until voting begins will amplify the potential risks involved.
Recent poor economic data has also prompted the Bank of England to revise GDP (gross domestic product) forecasts to the downside. GDP for 2016 is now projected at 2.0% down from a previous 2.2%; with 2017 and 2018 also altered by 0.1 to 2.3% and 0.2 to 2.4% respectively.
The Sterling Euro has traded between 1.2612 and 1.2744.
US retail sale were up significantly in April. Purchases were 1.3% higher than in march signalling that the US consumer is again willing to splash the cash as a healthier household financial environment leads to improving confidence. The USA will of course need its consumers to help kick start an economic recovery which has certainly stalled so far during 2016.
For competitive exchange rates, low transfer fees, expert guidance and the special offer of your FIRST TRANSFER FREE call moneycorp on freephone 800 785 011 or visit www.moneycorp.com/algarve
