In the short week of trading after Christmas, the Single European Currency strengthened steadily with the move accelerating to reach a best level on Friday of USD1.2025; its highest since September 10th. Taking the year as a whole, the euro was the best performing major currency in 2017.
In early January as worries grew about upcoming elections in the Netherlands, Austria and France and the rise of populist anti-EU parties, there were concerns about a true existential crisis for the currency. EUR/USD hit a low point for 2017 of just 1.0341. With the resounding victory for Emmanuel Macron in the French Presidential Elections, it seemed, instead, that the Franco-German axis at the centre of EU politics for two generations would be strengthened and reinforced.
The euro has subsequently shrugged off a poor election outcome for German Chancellor Angela Merkel and the dissolution of the Italian Parliament ahead of elections to be held in early March 2018. The economic recovery has gained traction across the whole of the EU and though inflation has not yet followed, it surely will if recent increases in energy prices are sustained.
Whilst much of the good news for the euro may already be ‘in the price’, its positive momentum and excellent economic growth story leave it well poised to extend recent gains in the first part of 2018. Its first test will come later this morning when December’s final PMI manufacturing figures are released for all the Eurozone countries.
On this first trading day of 2018, the EUR opens in Europe at USD1.2025 and GBP/EUR1.1245. One year ago, it began 2017 at USD1.05 and GBP/EUR1.17.