The pound traded with modest gains on Friday as GBP investors reacted to the latest UK GDP release.
- EUR Monthly Highs: £0.89, $1.24, AU$1.61, NZ$1.71, C$1.61
- EUR Monthly Lows: £0.87, $1.22, AU$1.56, NZ$1.67, C$1.56
- Fears of trade war between the United States and European Union weigh on euro
- European Central Bank President Mario Draghi maintains cautious tone
As well as the usual stream of economic data, markets have plenty to consider on the geopolitical front this month as fears of a global trade war continue to build.
The US threatened to levy tariffs on imports of steel and aluminium, suggesting that it would exempt only a few of its trading partners, prompting the EU to hit back with threats of duties on American goods such as Harley-Davidson motorcycles, Levi jeans and Bourbon whiskey.
For a while it seemed like the US and the EU could get sucked into a tit-for-tat cycle of ever-tightening trade restrictions, but lately the White House’s attention has shifted towards China and since then the EU seems to have flown under the radar.
While the latest European Central Bank (ECB) monetary policy meeting resulted in a statement that was free from prior references regarding the Governing Council’s preparedness to raise or extend quantitative easing in response to economic weakness, any positivity this generated was quickly curbed after President Mario Draghi warned over the potential impact of a trade war with America.
More recently, several rounds of disappointing Eurozone economic data have somewhat softened expectations of a more confident outlook from the ECB regarding the economy.
However, the latest Eurozone inflation data did show an uptick in the overall rate of price growth to 1.4%, putting it just over half a percent below the ECB target level.
The European Central Bank next meets at the end of this month, with the meeting concluding on Thursday 26th April.
Once again no changes are expected, and it remains to be seen how Draghi will respond to the latest disappointing eco-stats from the Eurozone economy.
Should interim economic data, such as the high-profile ZEW economic sentiment surveys and Markit sectoral PMIs, continue to disappoint forecasts it is likely the euro will fall as markets begin to wonder whether the Eurozone economy is slowing down after a strong period of growth.
There is also no guarantee that there will be further developments in the trade relationship between the US and the European Union, so the euro could experience some weakness on continued fears of a global trade war.
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