Yesterday’s June Industrial production report for Germany disappointed, showing a surprisingly deep contraction of -1.5%, falling short from the markets expected number of -0.4%.
Germany is the Eurozone’s biggest economy. There is rising speculation that Germany could be headed towards a recession, most likely dampening the Eurozone’s outlook and the euros currency appeal.
Carsten Brezeski, a chief Economist at ING bank said’ ‘Add to this a further escalation of the current trade conflicts, Brexit and an on going structural transformation in the automotive sector and the outlook doesn’t look better. Against this background, recent tentative signs that the domestic economy’s resilience is crumbling are concerning’
Despite this the euro continues to make gains from weakness suffered by rivals such as the pound as the risk of a No deal Brexit remains the apparent bigger concern for the currency market. While the USD is currently experiencing mixed performance in reaction to the flared up US-China trade tension despite being a safe haven currency, the euro may have benefitted a little from the safe haven demand.
This morning will see the release of the European Central Bank economic bulletin report. The markets will be paying close attention to see if they are any further indications the German economy could face a recession in the near-term, which would prove to be a negative again for the euro.
The Eurozone remains clouded with doubt about its future and even more so with concerns Germany could be headed for a recession but as things stand euro continues to remain strong during difficult times. The near future could prove critical for the single currency, and with the potential of the UK avoiding a Hard Brexit, chances rated at 60% by Barenberg Bank, this could put the euro on the back foot again.
But until then the euro may remain in favour over the pound with the potential to gain further until a cleared direction is gained on the UK’s Brexit plan. You may wish to stay in touch with your account manager at to make sure you are kept up to date on the latest trends for your next transfer.
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