EUR Forecast – Euro Sell-Off Continues Following Lats Week’s Gains (Matthew Vassallo)

The EUR has weakened against both Sterling and the USD this week, falling below 1.14 and 1.18 respectively.

The Euro had benefited from a quick-fire sell-off of Sterling currency positions, as the markets braced themselves for last week’s Bank of England (BoE) interest rate decision.

Due to the central bank not raising rates the Pound’s value deteriorated and the Euro gained as a result.

However, these gains have started to retract following some positive wage figures for the UK and mixed economic data for the Eurozone this week.

The key data release was the latest Gross Domestic Product (GDP) figures, which came out as expected but Industrial Production figures came out below expectation.

However, the key reason behind the Euro’s lacklustre display this week was likely the dovish address by European Central Bank (ECB) president Mario Draghi.

His normally upbeat tone was unusually sombre, accepting that Eurozone growth had slowed, although he didn’t go as far as committing to a change in the ECB’s current monetary policy scheme.

Looking at EUR/USD rates and these have dropped below 1.18, with the EUR now firmly marooned under 1.20 having plenty of support above this threshold only recently.

One of the reasons for the current malaise, is likely to be the potential trade tariffs that US President Donald Trump intends to impose on any imported Eurozone goods, a move which could increase tensions between the regions.

Add to this growing concerns over how Eurozone business may be negatively affected by Trump’s decision to pull the US out of the Iranian nuclear deal and it is easier to understand why investors may have shied from the single currency in recent weeks.

It is no secret that the Eurozone economy has certainly slowed of late, with the official figures for the first quarter of 2018 well below last years predicted growth. Many of the Eurozone’s key economies are under pressure, in particular Germany’s, which widely considered the powerhouse of the Eurozone and has had the ability to withstand any economic downturn inside the Eurozone region.

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