Mario Draghi delivered an upbeat speech in front of Irish lawmakers yesterday as he downplayed the recent string of weak economic data and that the Eurozone’s economic expansion is still set to continue by affirming that the European Central Bank’s plan to unwind its asset purchasing programme (APP) is due by the end of this year and to keep interest rates at record lows until the summer of 2019.
Despite his words, the economic data did little to support his view. The quarterly economic forecasts released yesterday showed revised down estimates for 2019, citing global trade tensions, Italy and Brexit the main standout reasons - themes our regular readers will be very aware of.
Furthermore, German export data showed a sizable hit yesterday as global trade tensions seem to be hitting the German economy hard.
With this in mind, I would expect the Euro to struggle in the coming weeks, should this negative data trend continue. Sterling has been steadily advancing against the Euro on the rumours that a Brexit deal could be struck this month, with investors piling into Sterling as a result and helping to lift its value.
This combined with a slowdown in the Eurozone economy as the recent data suggests, means that Euro buyers could soon be faced with some great opportunities.
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The EU Executive Commission released their predictions for growth through 2020 and suggested Italy would be the slowest of the Eurozone. One of the main issues with this is that the Italian's budget at the end of October suggested that growth will start to improve by 2020, something the EU’s analysts don’t believe will happen.
It seems difficult to believe that the EU are going to concede to the Italians and allow their debt deficit to continue growing, especially as they’re the ones bailing them out. This will be a story to keep an eye on next week and should it drag on there could continue to be a threat to euro strength.
Looking forward to today’s data and there is a lull in economic data that could help the Eurozone to retrieve some of its losses of late. Clients looking at buying Euros with Pounds today will want to keep an eye out on UK Gross Domestic Product figures and headlines surrounding Brexit.
We could see Sterling extend its gains with the lack of Eurozone data today, so get in touch with your broker in order to capitalize on any movements.
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