The protests in France from the gilets jaunes (yellow vests) show no signs of easing following more protests last weekend as tensions continue to rise. Further protests are expected this weekend with “Day 10” of demonstrations planned for Saturday, which is likely to create further political uncertainty not just in France but across the EU bloc. Politically this is unwelcome news for the Eurozone whilst economically it is causing damage to the French economy. This is proving negative for euro exchange rates and the longer this drags on the worse it is likely to become for the single currency.

Currency Pair% Change in 1 monthDifference on £200,000
GBPEUR2.75%€6,220

French President Emmanuel Macron continues to be heavily criticised for his economic policies despite organising a national Grand Debate over the next two months to try and restore order. The debate which will be “neither an election or a referendum” will try and take into account public issues and shape ideas into policy.

In scenes though that mirror events in Catalonia last year where a heavy response against civilians was seen, a French man was shot in the back of the head by French authorities whilst running away at a demonstration in Bordeaux. What started as a protest over fuel tax and the cost of living has now grown into something far bigger which is against the system and puts substantial pressure on Emmanuel Macron to see this through.

With the European elections approaching in May this is all extremely relevant for Euro exchange rates and could see the Euro weaken as the date approaches. In Britain the yellow vest phenomenon has so far proven less successful after recent clashes between yellow vest wearers of the left and the right which broke out in Trafalgar square last weekend.

Euro Weakness after German GDP Falls

Euro Weakness after German GDP Falls

Germany has returned to the headlines after reporting weak economic growth this week. Germany's Gross Domestic Product figure rose by just 1.5%in 2018 compared to 2.2% in 2017 which is the weakest rate of growth in five years. Whilst the economy has still grown for the ninth year in a row it is clear that a number of issues are having an impact on Germany’s export markets. It all comes at a time when European manufacturers are being regulated with new vehicle emissions tests and a move away from diesel. The German economy is particularly feeling the squeeze as a result of these changes with a recession starting to look likely after a big drop was seen in industrial production last week.

Concerns over the slowdown in the global and Chinese economies are proving to be the biggest drivers for the drop in German growth and which presents the biggest risk for the euro.

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