The positive inflation data from Germany during yesterday’s trading helped the EUR hold its ground. As the engine room of Europe, Germany’s figures can hold some weight with investors so it will be interesting to see if the expected contraction in the Wholesale Price Index release today proves to be a market mover. Wednesday’s summer economic forecast release from the European commission was flooded with optimism despite the unfavourable economic and geopolitical landscape the eurozone is currently navigating through.
The fear was that the growth forecasts across the bloc would be revised down, global trade tensions with the US, China and the UK being the main concerns. In fact, growth forecasts remained unchanged at 1.2% for 2019, with a boost in retail car sales and favourable weather conditions once again being cited as favourable factors.
In truth, the real tests of the euro’s resilience may come from the start of next week. Despite their positive undertone, the EU commission did allude to the concerns of an over dependence on domestic demand within the bloc. The ZEW economic sentiment survey on Tuesday then could well influence the single currency’s value moving forward and is important to consider if you are in the market for euros.
Looking into the political sphere, the markets will be keeping tabs on the Spanish parliamentary vote on the 22nd of July. Current Prime Minister Pedro Sanchez stated yesterday he has no intention of calling another election in a bid to draw backing from other parties and fend off the push from the right-wing parties including the People’s party and the Ciudadanos and Vox.
Sanchez’s party (PSOE) holds 123 seats so far and will need a big push the reach the absolute majority of 176 votes to be able to form the next government and protect his position in power.
Naturally, euro holders could be exposed to volatility as the month goes on, particularly should it become apparent Sanchez’s cross-party talks are baring little fruit.
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