The European Central BankIn June, the European Central Bank announced that it would end its quantitative easing plan by the end of year, if economic data warranted it. Despite this, the euro saw losses as the ECB would not be raising interest rates until least next summer. In addition, the reduction of stimulus via QE could be reversed if economic data is weak enough. These decisions were unanimous, which Cook suggests will limit the strength of the euro over the short term.
Political uncertaintyIt’s not just the UK that is experiencing political turbulence. Legislation in Italy on migration, debt spending and taxes are all of a concern to the international investment community, while in Germany Angela Merkel’s ruling coalition has taken a blow. Such uncertainty will also likely negatively affect the euro’s strength.
Trading with the USThe EU is attempting to agree a deal allowing for a reduction in punitive tariff arrangements on motor vehicles with the US, but last month president Trump threatened a 20% duties rate on EU cars if trading barriers with the US were not broken down. While this offers more uncertainty, if the rest of the world keeps trading it could mean a fall for USD, and potentially gains for the euro. Overall, better safe than sorry – business dealing in Europe should be prepared for more euro volatility, which could affect their bottom line.
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