The IMF, International Monetary Fund reduced its forecast for global economic growth in 2019, highlighting increasing threats from the Trade Wars and concerns over in particular the European and German economy. The Euro lost ground as the report indicated the German economy was most at risk from a global slowdown, as the biggest economy in the Eurozone any weakness here is bad news for the Euro as a whole.
The IMF report highlighted a number of growing global issues which include the Brexit also. A key component of European growth is the motor industry and with the United States the main export market for the German car industry, accounting for 8.7% of exports, the fears over a slowing US economy and Trade Wars lowering demand, has weighed on the Euro.
The Euro could now struggle as investors fears over global growth start to manifest in the selling off of currencies which might be negatively influenced. Germany is not the only economy in Europe to be under pressure, Italy was also highlighted in the IMF report as a country with worsening economic prospects.
It is no secret of the political issues in Europe with populist parties gaining support across the region and worrying the markets. A key concern for me is the French situation as Macron the French Prime Minister is potentially losing support and we have very important European elections coming up.
Any rise in more populist parties in the European parliament will undermine the strong values which have supported confidence in the region. This could ultimately see the Euro weaker too and the IMF is I believe right to highlight potential future weakness in the Euro.
Of course, problems are not confined to the Eurozone. Brexit is a major headache for the UK and also the global economy too. Investors will need to be aware of the potential for a no-deal Brexit to also weigh on the UK and other global sentiments. The Trade Wars and US government shutdown too could also impact the US economy.
There are currently numerous global events which might trigger unexpected changes in the currency markets, as investors are forced to reprice currencies according to the risk their respective economies represent.
If you have a position buying or selling the Euro then making sure you are aware of all of the global events which might move the market is crucial to maximising your position. To discuss or receive an overview of your situation and what option would suit you best, please contact me Jonathan Watson to discuss further.
Thank you for reading and I welcome any feedback or comments.