Euro-area economic figures fail to promote euro uptrend

Posted 07 February, 2019

The euro rate keeps on steadily declining since the beginning of this week. The euro to US dollar rate is hovering around a two-week bottom of 1.1355 and may even touch the 1.13 handle. The rate downturn accelerated on Thursday driven by a new European Commission outlook.

The European Commission downgraded its GDP growth forecast for the Eurozone from 1.9% to 1.3%. Notably, the regulator revised its forecasts for almost all countries in the region with Germany and France affected the most.

The ECB contributed to the situation as well. Its economic report brought some pessimism to the market. Specifically, the regulator frankly pointed out that global economic growth is slowing down and risks of further deterioration are getting stronger. Moreover, the Central Bank also reported that core inflation is likely to continue going down in the coming months citing cheaper oil among the reasons.

In addition, today, 5-year inflation swaps reached their lowest level since November 2016. The tool is often regarded as an indicator of expectations for rates. With such dynamics, investors are less likely to believe that the ECB may raise the rate by the end of this year.

In the circumstances, the euro downtrend is not a surprise, especially amid the strong US dollar rate. Taking the combination of the two powerful pressure factors, one of which is fundamental, both short and medium-term outlook for the pair is getting worse, which was quite optimistic until now amid more flexible Fed position. 

Previous forecast

07 February, 2019 18:02

← BOE decides to leave interest rate unchanged as market expected

After the regular meeting held on Thursday, the Bank of England, in particular, its Monetary Policy Committee, has reportedly decided to leave the interest rate at 0.75%, which in fact agrees with the market players' forecast. The BOE's decision has fueled the decline of the sterling against the US dollar. For now, the UK can record the slowest economic growth over the past 10 years in 2019.

BOE decides to leave interest rate unchanged as market expected

Next forecast

06 February, 2019 16:11

Sterling fluctuates expecting BOE meeting this week →

The sterling is volatile in the middle of the week. The British currency has been plunging lately facing pressure from better US dollar demand and low economic figures in the UK. Specifically, the latter indicates slower economic growth which probably related to the longlasting divorce process. The sterling posted gains on Wednesday, though the downward movement is possible especially in light of the upcoming BOE meeting to take place on Thursday

Sterling fluctuates expecting BOE meeting this week
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