The euro is likely to come under renewed pressure if the economic data in the EU continues to disappoint the markets. German Industrial Production for January has fallen to -0.8% which is considerably less than the 0.9% expected. German exports also fell lower and the weaker data all points to a gloomy outlook for the powerhouse of the EU economy that is Germany. Italy have entered a recession whilst Germany narrowly avoided going into recession after Gross Domestic Product (GDP) showed no growth for the final quarter of 2018, having declined -0.2% the previous quarter. The German Government is now expected to cut its own growth forecasts once again which highlights the issues that the EU faces.
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The French economy too looks set for a dent in growth figures following a business survey from the Bank of France. The EU’s second’s largest economy is expected to grow 0.3% in the first quarter of 2019 which is lower than it is initial forecast of 0.4%. Much of this drop may be down to the gilets jaunes (yellow vests) protests which have been taking place since the end of 2018.
The Gilets Jaunes have protested throughout France this weekend for the 17th weekend in a row still leaving uncertainty in the air for French politics and to some extent the EU. In a sign the protests are running out of steam, the turnout has fallen to 46,000 last Saturday down from 300,000 last November.
European Central Bank President Mario Draghi has highlighted his own concerns on global growth after he said the EU was feeling the pressure of weaker global trade whilst also pointing towards a potential slowdown in the US on the way.
EU data is light today with no major economic releases ahead of Wednesday’s industrial production numbers. Any political developments between the EU and UK over Brexit today could have a major impact on EUR GBP with some volatility expected.
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