Is The Euro Going From Bad To Worse?

Interest rates are still the main topic of conversation at the time when Sterling is nearing a two-year high. The rise towards the two-year high has further fuelled expectations that the Bank of England will raise interest rates; and if it does, it will be a milestone move as no other central bank has yet to do that since the last crash. As a result of this ‘expectation’ Sterling has become one of the most popular currencies to purchase.

In Europe, the economy is still in need of a good feeding. Inflation data has strongly suggested that more money needs to be injected into the economy, which could put the EU leaders under a stronger watchful eye. If the Euro keeps declining, as it has shown in the previous weeks, Sterling is most likely to be used against it within market environments. With that in mind, technical analysis shows that the US dollar has also been advancing against the Euro which is a great sign for Sterling.

Domestically, the UK is almost confirmed to be the fastest-advancing economy this year, meaning that the recovery is true. However, the cost of living has gone up so since the recession so technically the population is worse off than they were prior to it. What this means for the economy is not confirmed at this stage but there will certainly be questions to ask later in the year. On the positive note, we saw the UK Gross Domestic Product (GDP) advance by 0.8% in the second quarter, which mirrored the strong advancements made at the beginning of the year. It is this data specifically that is producing economic confidence across the trading spectrum.

The Euro zone has not been that lucky. Since the downing of the Malaysia flight over Ukraine, further sanctions had been added to Russia from European and US officials. As Russia is the main supplier of oil and natural gas to Europe this causes concerns for the Euro zone. For example, 185 million tonnes of crude oil and 100.7 million tonnes of natural gas are supplied by Russia, most from Russian giants such as Gazprom who are the main sponsors of the Champions League competition. Despite Russia having their own problems such as the possibility of the World Cup cancellation, sanctions by European leaders has hit the Euro very hard; even in the Euro giant Germany, where business morale is at the lowest for almost a year.

All eyes are now on the Tuesday’s UK mortgage data which if positive, should prove the economic recovery is gaining traction. From the US side, the US Federal Reserve members are in a rate-discussion meeting which could prove to be crucial for the ever advancing dollar along with the weekly US job numbers at the end of the week.