How much further will the Euro weaken?

The Euro has been weakening as concerns mount over Italian debt levels which saw bond yields on Italy’s government debt jump to levels not seen since 2014. With the current yield (return) on the debt at 3.7% at its highest this week, the Euro has weakened quite dramatically which has caused a weakness on the Euro.

The yield is essentially the return investors will get for investing in the debt and the riskier it is, the higher the price that this will rise. Any move above 4% would likely spark fears over other Eurozone economies, a report in the Financial Times today suggests that this level could be a ‘tipping point’ for other concerns.

As a mark of just how far the concerns have come, we have seen this yield rise from below 2% when the new coalition took power in May. This is quite a dramatic turnaround in a short space of time and helps explain why the Euro has been sold off and what troubles could lie ahead in the future.

Economic issues will also take precedence as we get closer to the 25th October, this is the next ECB, European Central Bank, meeting where we will learn of some of the latest news relating to their economic plans. The Euro might well come under some further pressures in the weeks ahead because of this, it might be that the Italian issues force the ECB to scale back some of their plans.

Political concerns in the Eurozone are also around owing to some of the issues remaining in Spain. Expectations for the Euro are likely to remain troubled in the weeks ahead and this might well put more pressure on the single currency.

If you are looking to buy or sell the Euro then we have some very interesting developments ahead for the Euro, as well as its counterpart currencies. An example would be GBPEUR where Brexit appears to be taking shape which has helped the pound to a 3-month high against the Euro. And against the US dollar, continued US confidence over higher interest rates has seen EURUSD fall to 2 month lows.

If you have a position buying or selling Euros and wish for some information on the best timing and strategies to help maximise any currency position, please do contact me directly on [email protected].

Thank you for reading and I look forward to hearing from you and discussing this most interesting of currency markets soon.