Could the Euro Crash in 18 Months?

27 January 2017 by News Desk   |   SHARE  

It’s been an interesting week for markets fluctuating on political developments and the Australian dollar has softened against the pound and US dollar, while remaining in a tighter range against the euro say currency experts FC Exchange.

Pound Sterling

UK Prime Minister Theresa May published a surprisingly short Brexit bill this week and gave MP’s five days to amend it. The 130-word legislation which totals eight lines is hoped to be approved quickly in order to give May the authority to trigger Article 50 and officially start Britain on its journey out of the EU.

Friday’s stateside trading is due to see Theresa May meet US President Donald Trump in what will be the first meeting between the new president and another foreign leader since the inauguration. Although the UK can’t officially begin post-Brexit trade deals until 2019, it’s expected the relationship between the US and UK will be a topic of discussion as well as global security challenges, intelligence cooperation, and NATO.

US Dollar

The dollar began to rebound against the euro (USD/EUR) and the pound (USD/GBP) on Friday as investors looked towards the US durable goods orders and gross domestic product (GDP) figures due out later in the day. Annualised GDP is expected to slow from Q3’s 3.5% and reach lower levels of 2.2% growth.

Euro

Thursday saw Greece and its creditors fail to come to an agreement again after talks attempting to find a resolve to the nation’s deadlock bailout took place. The hope is that a solution can be found before the Eurozone is thrust into political uncertainty with an array of elections set to cause upheaval in the currency bloc throughout 2017.

Meanwhile, Professor Ted Malloch, a former Oxford university professor and the person tipped as becoming the next US ambassador to Brussels, suggested that the euro could collapse in the next couple of years.

Malloch stated: ‘The one thing I would do in 2017 is short the euro… It is a currency that is not only in demise but has a real problem and could in fact collapse in the coming year, year and a half.’

However, European Economic and Financial Affairs Commissioner Pierre Moscovici responded to the comments by Malloch, saying: ‘I don’t think this is a very informed judgement, the euro is not going to collapse, neither in 18 months, not in 10 years, nor in 20 years.’

Australian Dollar

The Aussie dollar had a short-lived upsurge in Friday’s Pacific trading with the release of some favourable Australian data. The nation’s latest producer price index (PPI) rose by 0.5% in Q4 2016, coming in 0.3% stronger than economists had forecast. On the year, the Q4 reading published at 0.7%, following Q3’s 0.5%.

In other positive news, Australia’s export prices surged by 12.4% quarter-on-quarter in Q4, beating the 11% forecast by economists. China’s increasing demand for top-end wines bolstered the prices of Australia’s wine exports by a total of $2.2bn in 2016 – increasing by 7%. Wine export growth to China rose by 40% in 2016 and totalled $520m.

 

Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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