Spanish Trial could cause a drop in Investor confidence in the Euro
The Euro could be in for a rough time. The bloc is currently experiencing the worst growth since 2014. Italy has just entered a recession and the engine room of the Eurozone, Germany has just narrowly avoided recession.
The situation in Spain should also be watched closely. The trial of 12 Catalan separatists has begun. They are in court following an independence bid that was deemed to be illegal in 2017 for Catalan independence.
The Spanish government is playing a risky game and only has a slim majority in pursuing this trial. They risk pushing away Catalan separatist parties that have supported the government in a coalition. This has the potential to cause an early election which could be as soon as April. This would no doubt be a cause for concern amongst investors which in turn could hit the Euro.
There is also a worrying situation in France. There is rising popularity in France for the gilet jaunes which is combining with a drop in popularity for Macron. The elections in May could prove interesting and will no doubt create volatility on the exchange.
There is also the situation with Greece which is seemingly being swept under the carpet and the ongoing trade war with the US. The Trump administration is threatening an increase of 25% in tariffs on cars. This would hit the Eurozone hard, particularly Germany.
Quantitative Easing (QE) which is essentially pumping money into an economy to stimulate growth has recently end3ed in the bloc. Vast sums, at one stage in excess of €80mln a month was going into the Eurozone with seemingly little effect. With QE now cut to zero it will be interesting to see how the Eurozone copes.
Unfortunately the lack of clarity surrounding Brexit is still outweighing the Eurozone’s troubles. The next key date on Brexit talks is 26th February where May is due to put forward her new proposal for Brexit hopefully with concessions form Brussels’s. Be aware Brussels have consistently said there will be no changes to the current deal. Sterling could face further losses short term.
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