Today saw the release of Euro Zone Services Purchase Manager Index Data. It captures an overview of the condition of sales and employment. It can be a key indicator as to the health of an economy. The data was positive and we did see the Euro gain strength after the announcement. This was was short lived against Sterling and we have since seen GBP/EUR strike 1.18.
Although the Euro currently sits at what can be considered acceptable buoyancy levels, there are some serious underlying factors that could cause a sharp fall for the Euro. First up, let us look at Greece. It seems that Greece’s insurmountable debt to the International Monetary Fund has been swept under the carpet by the media. The problem is still there and at some point needs to be addressed. Could Greece be forced out of the Euro? Would this be good or bad? would other countries within the bloc follow suit by leaving?
Next, Let us look at Italian Banks bad loans, now in excess of €360bn. Bad loans was a growing problem in Ireland, but the situation was addressed before it escalated to a point of no return. The Italians have not followed suit. This is a major problem for the Euro and could cause a quick and sharp fall in Euro value.
Inflation in the Euro Zone is an issue that the ECB are having a lot of trouble trying to improve currently there is €80bn being pumped in per month and this could be set to increase. It looks like they are throwing the kitchen sink at the problem and there is still a substantial lack of growth.
With far right parties gaining favour in the bloc, particularly in Germany, there is the possibility of further referendums and this will cause a catastrophic fall in Euro value.
If one of these factors rear its head it could mean big trouble for the Euro. If you are selling Euros it may be wise not to procrastinate for small gains.
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