Weekly Roundup: Euro stumbles as Germany enters recession

Philip McHugh May 30th 2023 - < 1 minute read

The euro enjoyed some support early on in last week’s session as markets responded to hawkish comments from European Central Bank President Christine Lagarde over the weekend.

Downbeat PMI readings and a stronger US dollar put some pressure on EUR as the week went on. However, the currency was able to recoup these losses midweek without a clear catalyst, despite German economic data missing forecasts.

More weak data from Germany dented the euro on Thursday. The country’s final GDP reading for the first quarter showed that the Eurozone’s largest economy slipped into a recession.

This maintained pressure on the single currency through to the end of the week, while cautious comments from ECB Chief Economist Philip Lane added to EUR’s downside.

A larger-than-forecast drop in Eurozone economic sentiment has put the euro on the defensive this week. This month, investor morale declined to its lowest level since November 2022.

Looking forward, the bloc’s latest CPI – due out Thursday – is in the spotlight. An expected drop in headline inflation could dampen ECB rate hike bets, thereby weighing heavily on the common currency.

Later that day, the ECB’s policy meeting minutes are to be published. Any indications that the bank is close to pausing its tightening cycle could drag EUR even lower.

Written by
Philip McHugh

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