Germany’s growth forecast slashed
In this look at when to buy Euros, I’ll show you how the Euro’s prospects for the second half of the year have once again been dealt a blow.
Germany’s central bank, the Bundesbank, has decided to revise down its growth forecasts for Germany, as a result of the slowdown in international demand. This is due to the ongoing trade disputes with the US. The Bundesbank has cut its 2019 projections down to 0.6% from 1.6%, showing the fall in business confidence in Germany.
This change in projections further justifies the European Central Bank’s (ECB) hints from last week. ECB President Mario Draghi said that the ECB will consider upping its monetary stimulus into the Eurozone once more, in a bid to help alleviate the problems facing European businesses, and to boost inflation. These are a result of the global trade tensions.
The change in stance compared to the start of the 2019 is huge. Things could be set to get worse, as further contributing factors begin to weigh on the single currency. Despite the Trump administration instigating the trade wars, the US Dollar is benefiting, currently close to a two year high against the Euro. This is due to the greenback’s status as a safe haven currency.
We could see volatility this week, as EU members prepare to meet tomorrow, to discuss how to handle Italy’s seemingly insurmountable debt. There has been much posturing from Rome in the build-up to the talks. Multiple reports suggest that the Italian leaders are confident on being able to cut the deficit below the 2.4% of GDP target required by the EU Commission, and potentially below the 2.04% level that was agreed upon at the end of last year.
However, these reports have been questioned due to previous promises made by the current coalition. Italy’s government has forecast tax cuts and impressive investment programs for 2020, which are likely to be viewed with scepticism by other members of the bloc.
The face-off could cause volatility, as Brussels may wish to impose its authority over Italy, to warn off other EU members from mishandling their debt.
Should I wait to buy Euros?
The Eurozone’s problems do not have the same weight as those of the UK’s, with no Prime Minister and Brexit in limbo. The Pound could be set for further losses, with the majority of candidates up for Tory leader ready to bring a ‘no deal’ back to the table. I expect Sterling to remain fragile for the foreseeable future.
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