Sterling remained rangebound against the euro this week, in part because the UK has sent its revised Brexit proposals to the EU and European Council President Donald Tusk responded that he’s “open but not convinced.”

Looking elsewhere, the Eurozone economy remains on the back foot, while US President Donald Trump has launched an unexpected round of tariffs against the EU. This could further weaken the Eurozone economy and euro in future if this revised wave of tariffs continues.

Eurozone economy continues to decelerate in September

To begin with, according to economics watchdog IHS Markit’s Eurozone PMIs for September this week, the currency bloc’s momentum eased further last month. IHS Markit’s Eurozone composite PMI, measuring output in the bloc’s services and manufacturing sectors, fell by -0.3 points compared to August, to 50.1.

This was in line with economists’ forecasts, yet barely above the 50.0 figure that signals economic growth. It’s thought that the Eurozone is close to stagnating, in part because Germany’s composite PMI, the Eurozone’s largest economy and its engine room, fell to 48.5 last month, dragged lower by the USA’s and China’s intensifying trade dispute.

Eurozone inflation falls, unemployment beats forecasts

Eurozone inflation falls, unemployment beats forecasts

This week, both Eurozone and German inflation eased again in September. Germany’s price pressures declined by -0.1% last month, to 0.9%, while the Eurozone’s core inflation dropped by -0.1%, also to 0.9%.

Both these figures are well below the European Central Bank’s (ECB) inflation target of close-to-but-below 2.0%, so vindicate the central bank’s recent decision to cut interest rates and restart Quantitative Easing. However, it’s worth noting that not all the Eurozone’s economic data this week was downbeat. German unemployment surprisingly fell by -10,000 in September, while Eurozone joblessness declined -0.1% to 7.4% in August.

President Trump launches trade tariffs against EU

Elsewhere this week, US President Trump has unexpectedly imposed $7.5 billion of tariffs on EU goods, including British woolly jumpers, German industrial components, and Spanish olive oil. The tariffs are 25%, so will make buying these EU goods far costlier in the United States.

President Trump has added these tariffs, in retaliation for the World Trade Organisation (WTO) finding that the EU illegally subsidises the European aerospace company Airbus. This opens another front in President Trump’s global trade war, of which the Eurozone is already arguably the biggest loser, so this may affect the euro, looking ahead.

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