Strong Eurozone growth bodes well for the Euro
Eurozone growth has been strong of late and investor confidence has risen in regards to the euro and the euro has strengthened against the majority of major currencies as a result. We have seen better than anticipated growth in Q3 from the Eurozone and this has prompted the growth forecast to be upgraded. It is not just the usual suspects who are pulling their weight either. Italy, who’s economy is not the strongest at present has also showed higher than expected growth.
If economic data continues to impress the European Central Bank (ECB) may raise interest rates which would no doubt cause substantial euro strength. Last week the strongest performance from a G10 currency was indeed the Euro.
Inflation data is due out this morning and it will be interesting to see if the positive data releases continue. Inflation is one of the key factors in making monetary policy decisions so this could well cause volatility on the markets.
Catalonian Independence a threat to the Euro
It is not all positive for Euro sellers however, it would be wise to keep an eye on developments in Spain in regards to the Catalonia situation. If independence becomes more apparent this could hit Spanish GDP with Catalonia making up to 20% of Spain’s GDP overall. There is further risks as well, as if Catalonia does leave Spain this could create a domino effect where other regions in the Eurozone follow suit.
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