Trade Wars a concern for the Eurozone (Daniel Johnson)

Germany’s Growth Forecast slashed

The Euro’s prospects for the second half of the year have  once again been dealt a blow.  Bundesbank has decided to revise it’s growth forecasts for Germany as a result of the slowdown in international demand due to the ongoing trade disputes created by the US. Bundesbank cut their 2019 projections down to  0.6% from 1.6%, showing the fall in business confidence within Germany.

The change in  projections further justifies the European Central Bank’s (ECB) hints from last week.  ECB President Mario Draghi alluded to the fact the ECB will consider upping it’s monetary stimulus into the Eurozone once more in a bid to help alleviate the problems facing European businesses  as a result of the global trade tensions and try and boost inflation in the Eurozone.

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 greenbacks 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 suggesting that the Italian leaders are confident on being able to produce a deficit that is 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.

These reports have been questioned due to pervious promises made by the current coalition, with tax cuts and impressive investment programs forecasted for 2020 likely to be viewed with scepticism by other members of the bloc.

The face off could cause volatility as Brussel’s may wish to impose its authority over Italy to warn off other EU members from mishandling their debt.

GBP/EUR

With no PM and Brexit in limbo the Eurozone’s problem do not have the same weight as that of the UK’s. With the majority of candidates up for Torie leader ready to bring a no deal back to the table. the Pound could be set for further losses. I expect Sterling to remain fragile for the foreseeable.

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