Euro weekly update – week ending 21st July 2017

The euro gained back some of what it had given up against sterling during the previous week. A combination of good sentiment from the eurozone – notably in its largest economy, Germany –sent the euro on a good trajectory from the beginning of the week. In the UK, the potent cocktail of rising inflation and stagnant real wage growth shows little sign of abating, and while the UK inflation rate was down 0.3% from May to hit 2.6% in June, many people are seeing their earnings fall in real terms due to the rising cost of living.

The big anticipated event was the European Central Bank (ECB) meeting on the Thursday. During the meeting, Mario Draghi was far from all-out hawkish, warning of inflation pressures in the eurozone. He did hint about an autumn “tapering” of the €60 billion bond buying programme however, which pushed the euro higher.

The euro was also helped against the dollar as faith in Donald Trump’s ability to pass through some of his reforms is waning rapidly. People from his own party once again blocked his attempts at repealing Obamacare, and the markets are rapidly losing confidence in his ability to push through tax and infrastructure reforms.

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