Recently, President of France Emmanuel Macron’s call to all Europeans to encourage support, bolstered support behind the single currency. The vision of shared responsibility for financial stability across the bloc painted a reassuring picture that has helped keep investor curiosity from across the markets and has arguably helped prop up the single currency’s value since the French president’s election back in 2017.
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The reality remains however that the vision has failed to gain any kind of tangible progress and once again this week took another hit, highlighting the ever growing divide in interests and in ideals between the bloc’s political powerhouses.
Chancelor Merkel’s successor as leader of the Christian Democrats Annegrat Kramp-Karrenbauer openly outlined Berlin’s lack of support for Macron’s proposed initiative, making it clear a push for “communitising” debt will never get approval.
The timing of this intervention is poignant given that European Parliamentary elections are just around the corner, with populist leaders capitalising on any opportunity to shoot down wide spread commitments of their respective nations to their fellow European members.
Any underlying value the markets may have attributed to the single currency as a result of stability within the bloc may well be called into question once more.
The votes this week have left euro holders in a particularly delicate position, but even if we take Brexit volatility out of the equation there does seem to be little reason for optimism.
Today we see industrial production data from across the bloc. The levels have stagnated since the final quarter of last year, potentially as result of global trade tensions.
Furthermore tomorrow’s key inflation levels from Europe’s powerhouses France and Germany may well provide further volatility to euro exchange rates. But given both nations have had their growth forecasts for 2019 downgraded there is a strong argument to suggest Thursday’s CPI data might adversely affect the euro.
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