The Eurozone continues to show signs of an economic slowdown, despite the European Central Bank (ECB) recently shrugging off suggestions that the economy was heading for a prolonged period of dovish growth.
Germany, which continues to be the economic linchpin of the single bloc, has once again seen Manufacturing figures dip to a 33-month low, whilst France’s private sector has fallen into contraction for the first time since 2016.
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These are potentially worrying signs for investors, who will be monitoring economic output closely over the coming weeks, with the ECB set to end their Quantitative Easing (QE) programme by the end of December.
ECB President Mario Draghi has remained steadfast in his commitment to tie up the Central Bank’s asset purchasing scheme by them end of 2018, but how will the Eurozone economy and ultimately the EUR fair, once this support level has been withdrawn?
Whilst only time will tell, if we were looking purely at the data emanating from Eurozone over recent months, then it is clear that the impressive growth from earlier this year has certainly subsided.
The euro itself has found sufficient support against the pound despite concerns over the longer-term efficiency of the Eurozone post QE but this of course is inextricably linked to the current state of the UK economy and the deep-rooted concerns over how the UK economy will fair, following its eventual separation from the EU.
EUR/USD levels may paint a truer picture; these have fallen back towards 1.13, with this resistance level being severely tested over recent days. Concerns over the current trade standoff with the US have caused investors to flee the single currency and return to the safer haven USD, thus weakening its position further.
In other news further signs of political unrest have surfaced in Belgium, with thousands of protestors taking to the streets in Brussels over the weekend. This was in protest to the UN migration pact signed in Marrakech last week and was orchestrated by Flemish right-wing parties, citing their concerns over how the pact would likely lead to increase in immigration.
This move is the latest in a number of far-right uprisings across the EU over recent months and could cause further political instability, which in turn could heap further pressure on the EUR over the coming weeks.
Looking ahead and it’s a busy start to the week, with key Eurozone Trade Balance figures and inflation data being released this morning. The trade figures will be of particular interest to investors, with the aforementioned concerns of a slowdown in trade following the current trade standoff with the US.
The ECB will also be hoping that inflation remains close to their target of 2%, ahead of the end of their monetary stimulus programme at the end of December.
These are likely to be the two key releases of the week, with only Construction data on Wednesday and Consumer Confidence figures on Friday to follow.
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