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Euro sinks on fears over Turkey crisis

Geo-political risks and US sanctions against Turkey cause jitters across the European banking network.

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The European Central Bank (ECB) is concerned about European banks’ exposure to Turkey and its tumbling currency, according to reports in the Financial Times. The Lira has dropped 35 per cent so far this year due to geo-political tensions and recent sanctions from the US.

European lenders to Turkey including Spanish BBVA, French BNP Paribas and Italian UniCredit have expressed concerns over the stability of the European banking system, with the Euro dropping to its lowest levels since July against the Dollar due to the banks’ exposure to Turkey and boosting the Pound against the single currency.

The Office for National Statistics has just released much anticipated UK GDP data. Today’s data showed the UK economy rebounded by 0.4 per cent, as per market participants’s predictions, having improved from 0.1 per cent recorded in the first quarter of 2018. However, manufacturing continued to decline as the UK’s trade deficit grew as a result of reduced automotive and goods exports. Sterling dropped 0.5 per cent immediately after the data release to $1.2756.

Later today (13:30 GMT), the US will release inflation data. With the Consumer Price Index at 2.9 per cent, above the Federal Reserve’s 2 per cent target, an expected rise to 3 per cent could cement the speed of interest rate rises in the US. With the Pound and the Euro under considerable pressure against the Dollar, the data could propel the greenback into new territory again today.

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