Good morning from Euro fx. Euro weakness following inflation data
Has the Eurozone economy peaked and what does this mean for Euro exchange rates?
The Euro, similarly to Sterling has also had a torrid time of late and has had its economy or economic data to blame. In the table below you’ll see high to low GBP/EUR exchange rate movement and the difference when exchanging £200,000 to Euros in the last month.
The latest set of disappointing data from the Eurozone came yesterday in the form of inflation data.
Headline Inflation dropped off 0.1% from what was expected and core inflation fell to 0.7% from 1.0% the previous month. Earlier this week, economic growth figures for the bloc showed subdued growth for the first part of 2018, although this didn’t draw too much attention as the figures were as expected.
Whilst Eurozone inflation remains subdued, the likelihood of the European Central Bank (ECB) raising interest rates is practically 0% and the likelihood of the ECB having to extend its Quantitative Easing programme 2019 looking more and more likely, effectively keeping the Euro’s strength quelled long-term
Similarly to the Pound, the recent strength of the Euro has been attributed to the ECB stopping its QE programme sometime between September and December this year with a view to raise interest rates in 2019. With this speculation now ending, I would expect the Pound and the Dollar to now begin to make inroads against the Euro in the up and coming weeks and months.
Eurozone services data in focus
Today sees the release of the Eurozone’s service’s data and with it the composite PMI’s with give an insight into the overall health of the Eurozone’s economy.
Germany’s figures will be of particular interest to investors, with Germany widely considered to be the driving force of the Eurozone. With business sentiment recently slowing in Germany, these figures will be keenly watched. If these service figures disappoint it could, I’d expect a large sell off from investors causing Euro weakness.
Todays rates at EURO FX;
Euro = 0.86
Stg = 1.12
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