The cost of buying the single currency with the pound has been climbing. Brexit uncertainty remains one of the largest contributors to sterling value moving forward and most eyes are now on the next G7 meeting later this month when the new UK PM, Boris Johnson, will meet other European leaders along with Donald Trump face to face.
UK Brexit remains a key point for the strength of the GBP/EUR pairing in the short term, but there are potential concerns regarding the long-term strength of the Eurozone going forward. Eurozone GDP grew at a slowed pace of just 0.2% in the second quarter of this year, halving the amount of growth seen in the first quarter of 2019 which was 0.4%.
Manufacturing across Europe is also struggling with overall activity contracting last month at the fastest pace since 2012. Inflation across Europe is also well down on targets, the European Central Bank has a target of 2% but July’s data was confirmed at just 1.1%
Yesterday there was a rebound in German factory orders announced for July which was good news for the value of the euro.
European manufacturing is already experiencing its worst period in seven years and a fall in confidence has potentially increased the likelihood of an economic recession in the manufacturing sector in Germany specifically.
Marcel Fratzscher, president of the DOW German Institute for Research said on Bloomberg Television. “Germany’s economy is highly dependent on exports, and that’s what’s hitting the German economy now,” he added by saying “If the trade conflicts persist for many more years, this will hit Germany very hard.”
German Export figures are released on Friday morning and will be an interesting release to watch as it could well hint at concerns or a continual improvement for the period of June.
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