Euro Stocks, USD Higher
Euro stocks rallied from their one week low this morning and the US Dollar made strong gains, as investors turned their attention away from the healthy economic releases from the US last week and instead looked ahead to the beginning of a new set of trade talks between the US and China, the world’s two largest economies.
As European markets began the trading week, the US Dollar hit a 2019 high. Sparking a run in the greenback was weakness in the troubled Eurozone.
Germany, the world’s fourth largest economy and the economic powerhouse keeping the European Union project, is showing signs of trouble. For the first time in over two years, the German 10-year government bond yield dropped below 0.10% last week. Fears are mounting that the primary source of growth within the Eurozone for the last decade, is struggling.
The economic slowdown is placing further strain on an already embattled German coalition government. Last week, data released from the Federal Statistics Office in Germany, showed that German industrial output unexpectedly declined in December. It was the fourth consecutive month of declines.
The growing number of slowdown signs have prompted the German government to revise its growth forecast for this year down to just 1 percent.
The Brexit Effect
Although Brexit is yet to come into effect until the end of March, already the decision of the UK’s people to leave the European Union, is affecting Europe’s manufacturers.
With no deal in place and the increasing likelihood of the UK exiting the EU without any deal in place, German manufacturers are worried.
In 2017, Britain had the second-biggest bilateral trade deficit with Germany at 47.2 billion euros. The UK and the United States combined accounted for approximately 40 percent of Germany’s global trade surplus, which inched lower to 245 billion euros in 2017.
USD Higher
At time of writing, the USD is 0.19 percent higher against the Euro and 0.32 percent higher against the beleaguered British Pound. The japanese Yen is down 0.541 percent against its US counterpart, but level against its Canadian cousin, the CAD.
