When the European Central Bank president attended the European Parliament’s economic affairs committee Mario Draghi’s observations were in line with what could have been expected. The ECB is not, as alleged by the White House, massaging the euro lower to satisfy Germany. The euro is not about to break up: it is “irreversible”. Yet the scandal surrounding French presidential candidate François Fillon could leave the way open for the Front National’s Marine Le Pen to take over the Élysée Palace and one of her campaign pledges is to take France out of the single currency.
Another existential risk is the resurfacing of the long-running three-way squabble about Greece’s bailout. There is so far no sign of compromise between Athens, the country’s EU creditors and the IMF.
The dollar improved its position among the major currencies, beating sterling into second place by a fifth of a cent and taking a cent off the euro. Its upward progress against the euro was fairly steady as the single currency was rattled by political turmoil surrounding the French presidential election and the resurfacing of the Greek debt crisis.
The dollar’s movement against sterling was more erratic. A sharp and unexplained sell-off of the pound was followed in short order by an equally sharp rebound after MPC member Kristin Forbes said the economy “could soon suggest an increase in the Bank Rate”.
For its part the dollar headed into the weekend on a high note after a couple of ‘googlies’ from the president. With one he capitulated to Beijing, telling President Xi that he does, after all, recognise the “one China” policy. In the other he promised a “phenomenal” announcement about tax in the next couple of weeks.
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