So far 2019 has not been a good year for the euro and I expect further problems could be on the horizon for the single currency. Italy have a major debt problem and are in recession, the powerhouse of Europe, Germany, narrowly missed out a recession last month with the slowdown in the car industry cited as one of the major problems.
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Furthermore, the ongoing Brexit saga is putting pressure on the euro as other countries could follow suit in the years to come. Just last week the ECB announced that they will be keeping interest rates at 0% for the foreseeable future and providing further liquidity in the form of cheap loans to underperforming banks in a bid to stimulate growth. It’s hard to see how European countries are going to change their fortunes in the months to come due to global slowdown. Therefore, it could be a tough year for the euro.
It’s a busy week for European data releases. To start the week Germany are due to release their latest trade numbers on Monday. On Wednesday industrial production numbers for Europe will be released and to finish the week inflation numbers will be released Friday. Investors will be watching closely to see whether Germany’s poor run will continue and whether the ECB have acted to promptly due keep inflation above the 2% target. However, it is quite possible that in the House of Commons this week to be the main driver for GBPEUR exchange rates.
Theresa May will be hoping that MPs have changed their minds and therefore vote in favour of her deal on Tuesday. If this materialises the pound could gain value against the euro. However, if MPs don’t show support, they will have to return the day after to vote on whether the UK should crash out of the European Union. Recently MPs have been vocal in stating they don’t support a crash out Brexit, nevertheless if this gained a majority the ppund could face significant pressure. The last vote of the week will be on Thursday if MPs don’t support Theresa May’s deal or a crash out, this vote will determine whether or not to extend Article 50. If we get that far, it’s quite possible extension will take place causing further uncertainty for UK business.
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