Is the Euro set to dominate over Sterling?

Is the Euro set to dominate over Sterling? image

It is looking likely that the pound could be heading for parity with the Euro against an eight year low. The facts are clear; we now have levels approaching that of the financial crisis of 2008 and 2009.

The Euro, however, is seeing prosperous growth with Germany, France and other EU countries benefitting from the stronger Euro and the weaker pound.

The slump is now at an almost equal level to that of the Euro which last seen in 2009. Since the beginning of 2017 sterling has again fallen 8.3% against the Euro but increased 5.3% against the dollar.

Before the financial crisis in 2008, the pound was the dominant currency across Europe but hit trouble after the banking bailout of RBS and Lloyds Banking Group.

This drop took the pound close to parity with the Euro at €1.03, and it’s looking likely we see the same pattern emerge again in 2017.

The demise in sterling value has been mainly due to the 2016 Brexit vote which saw the pound take a massive downward spiral and with subsequent Brexit negotiations not going to plan the pound together with UK business leaders are taking the hit.

A political crisis in Europe was averted - especially in France where President Macron was duly elected ahead of the right wing nationalist party. This gave balance and positivity to the EU and the Euro currency. Just what the Eurozone needed to bolster the economy and stay competitive in the region.

Donald Trump’s pre-election promises of tax cuts and economic spending and investment didn’t materialise which meant that the EU saw fast-moving investors piling funds into the euro instead of the US and UK.

The HSBC is the first major bank to forecast that the pound will indeed fall into parity with the Euro in the final months of 2017 and is likely to remain at parity well into 2018.

And with the euro rising strongly could this mean that the Euro will become the powerhouse currency and the end of sterling’s domination in 2018?