The euro has been one of the worst performers recently as worries about its economy has impacted the single currency's value. The eurozone, the world's largest economy, has been struggling to grow, so much so that the International Monetary Fund (IMF) estimates that the euro area is likely to contribute the smallest amount in over 6 years to global growth.
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Germany, the powerhouse for Europe, has been hit by weakening demand, trade tariffs and problems with car production. This year Germany is expected to grow by just 0.8%, less than the UK which is dealing with Brexit worries. Italy is in its third recession in ten years with growth stagnating. Italy is one of the weakest performers in the industrial world. Spain is actually one of the better performers with growth expected to be 2.2% this year, twice the euro area average.
Political commentary across Europe is still having an impact. Most recently were the Spanish elections which took place over the weekend. This saw the Socialist Party, headed by PM Pedro Sanchez, increase their seats in Government to 123. This is less than the 176 needed to form a Government with an outright majority. Most are now interested to see what coalition could be formed. Currently the most likely seems to be a coalition formed with a number of minority parties, including the anti-austerity Podemos Party, which could make economic policies and growth forecasts for one of the fastest growing EU members.
The market has widely factored in the above commentary with only change in this expectation which will result in market value moving.
Over the last few months we have seen with some official economic data, in particular industrial productivity, better than expected activity. Later today, as Europe returns to work following May day, we have the latest updates with Manufacturing Purchasing Manager's Index (PMI) data which if again shows stronger activity figures the euro’s value could well go up in value as it could well result in a stronger overall Gross Domestic Product (GDP) figure being released for Q1 2019.
Tomorrow is also a busy day for the Eurozone with Consumer Price index being released along with Production Price index. Both are expected to show improvements which in turn may result in the euro gaining in value as we end the week.
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