The euro heads into the new trading week on the back foot after last week’s poor performance saw the currency drop to a near 34-week low against the pound. Friday saw the common currency drop 0.10% after a week of disappointing data releases. The Eurozone had a poor showing in its GDP and industrial data, with both seeing the euro lose favour with investors. The euro also continues to suffer along with the rest of the world following the spread of the coronavirus which has caused a global slowdown.
Meanwhile, the GBP pondered upon its long-term outlook. Following last week’s cabinet reshuffle, the UK government looked set to increase their spending on the public sector. News of this helped rally some support for the GBP, but Brexit remains the UK’s key focus which could hinder sterling in the months to come as EU-UK trade talks look far from an easy ride.
Euro Dwindles After Disappointing Data Last Week, as It Starts This Week on Back Foot
The euro opens trading in the new week on the back foot following last week’s lacklustre performance from both Germany and the Eurozone’s economic releases. Despite the European Central Bank’s (ECB) President Christine Lagarde highlighting the positive effects of the Bank’s policies on the Eurozone economy, the optimism didn’t last long as the following day unveiled shocking domestic results. The Eurozone’s industrial production fell by 4.1% in 2019 continuing the downward trend of last year’s 1.7% drop. Meanwhile, Friday saw the German GDP figure was at 0% during Q4 of 2019. The stagnation of the GDP worried investors as the German economy is by far the most important in the whole of the Eurozone, so with its domestic data showing signs of a slowdown, an economic rebound for the euro might still be far from around the corner.
Investors will be hoping that the euro can find a rallying point this week, but the ECB’s monetary policy meeting accounts will likely have a large role to play in this factor as the IHS Markit’s PMI data could give investors hope regarding the EU’s economic situation and shed light on the coronavirus developments.
UK Government Looks Set to Spend More to Ignite Fiscal Stimulus, Brexit Fears Still Linger
Meanwhile, the GBP rose in support after the UK government announced that it would look to increase spending on the public sector following the recent cabinet reshuffle. Plans for the new HS2 high-speed rail project excited investors as the UK looks to boost its fiscal stimulus in an attempt to lift the UK economy. However, Brexit will still remain a volatile topic for the GBP as negotiations are far from over and with another 10 months of talks until the Brexit deadline, volatility is expected in both the euro and pound sterling as the negotiations develop.
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