The Euro is facing tough times, falling by 0.7% this week and hovering around its weakest point in two years.
Overview
French and German figures show that the tables have turned on the larger EU economies, with improvements around the periphery countries like Spain and Greece that were the troubled ones now rising.
European Central Bank President Mario Draghi spoke yesterday and explained that he does not see a recession coming despite the tremendous underperformance in the overall continental economy. We see a highly data-dependent Euro as we go into the holiday-filled August. Recovery is possible, but the bigger fish in the pond have to start expanding because they have faded big time this year.
What to Watch Today…
- No major events scheduled for today.
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EUR
The shared currency is down to its weakest prices since January 5th, just at the cusp of being below its worst level of 2018. GDP figures for Q1 revealed a 0.4% expansion, meeting the low expectations that economist foresaw. Frankly, the environment is healthy, but the growth pace is low and could become worrisome if it does not pick up in Q2.
The European Central Bank has based its potential tightening stance on the consistency of widespread recovery, but Italy is dragging and the bigger economies are only expanding at measly levels. Hiking interest rates for 2019 may still be delayed further. Producer Prices are scheduled for tomorrow, which will help gauge if there is enough inflationary growth in business activity.
GBP
Sterling declined by almost 1.0% this week and could see a deeper dive into negative territory as Prime Minister Boris Johnson sparked fears of renewed friction between EU and U.K. negotiators. Johnson spoke to President of the European Commission Jean-Claude Juncker over the phone and said the current Withdrawal Agreement is “unacceptable.” The EU official explained that what was agreed with former PM Theresa May stays as is.
The Prime Minister’s goal has been declared to leave by the October 31st deadline one way or the other. Naturally, the Pound will continue to be the most vulnerable amongst the majors with politics overshadowing any resilience in fundamentals or recent surprises in sectors such as Retail Sales. Brexit is a dark cloud that cannot go away.
