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Fears for a German Recession Drives Euro Losses

Last week’s high: €1.1176

Last week’s low: €1.0939

Signs of German Weakness Dent Euro Appeal

Confidence in the German economy continued to deteriorate last week following disappointing factory orders and industrial production figures for July.

With the industrial sector in a persisting state of contraction at the start of the third quarter, the risk for a potential German recession increased.

Meanwhile, after an initial rally early in the week the GBP/EUR exchange rate ran out of steam on Friday.

Despite a chaotic week of politics in which PM Boris Johnson lost three pivotal votes, his call for a general election was rejected and a mass of rebel Tory MPs resigned or were expelled, the Pound failed to see the week out on a positive footing.

As parliament pushes forward with plans to avert a no-deal and a bill to delay the Brexit deadline looks set to pass into law today, the GBP/EUR exchange rate should remain biased to the upside.

Euro Outlook: ECB Monetary Loosening Set to Weigh on Single Currency

As the European Central Bank (ECB) is widely expected to loosen monetary policy at its September meeting, support for the Euro could prove limited this week.

Conversely, the GBP/EUR exchange rate could see a boost if ECB policymakers cut interest rates to a fresh low.

Demand for the Pound may prove limited, however, if July’s UK gross domestic product data shows fresh signs of an economic slowdown or the week’s political news proves detrimental to a positive market sentiment.

Meanwhile, the over-arching threat of a global recession will weigh on the GBP/EUR exchange rate throughout.

Key Events

9th September

09:30   UK Gross Domestic Product

12th September

12:45   European Central Bank Rate Decision

13th September

10:00   Eurozone Trade Balance

 

 

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