Swissquote Bank Research Team
Swissquote Bank Ltd
Trading sideways against the greenback since June in the 1.16 range, EUR fell most during last week’s Turkish lira collapse. Despite growth and improving sentiment indicators, the single currency continues to weaken against the USD while USD/TRY trend goes in the opposite direction. Fact: the euro does not constitute a safe haven. Currently trading at 1.1327, EUR/USD is expected to decline further, approaching the 1.1300 range
Supported by stronger than expected German Q2 GDP and inflation at 2%, the EU economy is doing well. Given at 0.40% and 2.20% on quarterly and yearly basis, GDP remains strong, a reassuring sign for the European Central Bank, whose normalization schedule remains: next rate hike expected in Q3 2019. However, as Italian debt continues to grow and concerns over Italy’s Prime Minister Giuseppe Conte’s plan to increase tax cuts and benefit spending are rising, the EU will probably face headwinds in coming months. Due in October, Italy’s budget, if increased, could raise Italy’s costs and cause a domino effect on EU banks holding Italian debt. Although economic vital signs favour a rate rise in 2019, the ECB will stay cautious in the coming months, as further uncertainties would delay a rate hike, a non-EUR-positive argument for the single economy.
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This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.
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