Euro Exchange Rates: What Facilitated the Euro’s Drop This Week?

What Facilitated the Euro’s Drop This Week
  • German and Eurozone GDP
  • Looking Ahead

The Euro has been one of the more struggling currencies out of the majorly traded currency’s in recent weeks. A significant economic slowdown has seen the Eurozone bow out of favour with investors as an economic rebound looks highly unlikely. The EU also entered trade talks with the UK this month which has seen volatility between the pairing as each party attempts to ‘one-up’ the other rather than coming to mutual agreements.

The euro started the week on a relatively high point following the release of their manufacturing and services PMIs which both showed a positive uptick in value. With manufacturing rising 0.1% and services climbing up 0.3%. Following these data releases, The ECB’s President Christine Lagarde gave a speech which spoke about the rebound of the euro and optimism moving forward. This gave the euro some momentum as the market was reassured by the central bank’s comments. However, this optimism didn’t last long, with the Eurozone’s industrial production figures dropping from -1.7% to -4.1% year-on-year. This poor result came the day after the ECB Presidents speech which saw the sentiment around the Euro turn sour.

German and Eurozone GDP

Unfortunately for the Euro the disappointment did not stop there. Friday saw the release of the German and Eurozone’s GDP values for Q4 in 2019. Both figures showed the slowest rate of growth since 2013. Germany only showed a 0.6% growth for the year in 2019 following the soft finish in the final quarter. Whilst the Eurozone’s GDP declined from the previous year’s Q4 growth of 1.2% to 0.9%. Both figures suggest the Eurozone is facing an economic slowdown, which contradicts the optimism displayed by the ECB in their Tuesday speech. As a result, the Euro has fell out of favour with investors and currently struggles as rival currencies like the GBP edge over it.

Looking Ahead

With little in the way of data releases for the EU until mid-week next week, the currency is likely to stagnate until it can find a stimulus. Next week’s ECB Monetary Policy Meeting Accounts could help the Euro should the central bank find some optimism moving forward. Whilst February’s services and manufacturing flash PMIs could help the Euro, unless the impact of the coronavirus shines through to dampen the reports on exports.

In the pairing between GBP and EUR, sterling looks to edge over the euro as its public spending plans are poised the for a boost as investors rally around the new fiscal stimulus for the British economy.

If you would like to learn more about factors influencing GBP/EUR exchange rates for an upcoming currency transfer, feel free to contact myself, Jonathan Watson, using the form below.