The euro has come under increased pressure this week for a number of reasons, both economically and politically. Although the euro is currently trading higher against the pound, this is more due to sterling weakness than euro strength. This follows increased speculation of a UK General Election being called after the UK Budget delivered on Monday promised to increase spending and reduce taxes, thus spooking the markets.
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The euro weakened against its other major currency counterparts including the US dollar, following the release of Eurozone Gross Domestic Product (GDP) figures. These showed a worse than expected economic slowdown from 0.4% in the previous quarter to 0.2% in quarter 3, its lowest level in 4 years. Growth across all EU countries also slowed from 0.5% to 0.3%. However the main area of concern was Italy which showed no Growth at all, causing huge concern with this being the 3rd largest economy in the Eurozone.
Another factor behind this euro weakness is Monday’s announcement that German Chancellor Angela Merkel would not look for re-election as leader of the CDU (Christian Democratic Union), and rumours are escalating that she could be forced out as early as next year, long before her scheduled departure date of 2021. This could have a severely negative impact on the value of the euro as investors do not respond well to uncertainty, therefore clients with an upcoming EUR transfer should keep a close eye on this story as it unfolds.
This morning at 10:00am, swings for euro exchange rates should be expected, as Unemployment Rate and Preliminary Inflation data, for September and for October respectively, will be released. Expectation is that the Unemployment Rate will remain the same at 8.1% but Inflation could rise to 2.2% from 2.1% which could cause the euro to strengthen this morning.
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