This morning's GDP figures for the Eurozone could rattle markets in the wake of Brexit. Fridays bank stress tests could expose huge vulnerability within European banks given the problems in Italy.

Will the Euro Weaken?

There are some major data releases from the Eurozone this morning which are likely to create some substantial volatility for the Euro today. EU Gross Domestic Product (GDP) numbers in particular are the ones to watch. Expectation is for a fall this morning from 0.6% to 0.3% which would represent a considerable fall in EU output. With financial uncertainty surrounding Brexit not only for the UK but also the EU then a low reading today could be very unwelcome news for the Eurozone.

Although GDP is still some way above zero, the point at which there is no growth, a move to 0.3% today would be a marked change in a period of global uncertainty. The Brexit impact which is likely to be felt in the EU could accelerate the Eurozone into recession later this year or next. A technical recession is defined as two consecutive quarters of negative growth and whilst there has been much talk about a potential recession in the UK, as it stands UK GDP is considerably higher than in the EU as was evident following Wednesdays official UK figures.

The European Central Bank (ECB) may also need to offer additional stimulus such as Quantitative Easing or cutting interest rates further into negative territory. This would all be negative for the Euro.

EU unemployment and Consumer Price Index numbers are both released at the same time so expect fireworks this morning. As if that wasn’t enough we also have the release of the European banks stress tests which are expected to make for grim reading especially for Italian banks. Of particular mention Italy’s Monte dei Paschi which is the world’s oldest bank has known capital shortfalls and is expected to be a focal point.

Anyone selling Euros may wish to trade before the announcements this morning as a weak GDP number, or bad banks will not bode well for the Euro. Call our trading floor on 01494 725 353.

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