The euro is shrugging off positive data this week as investors refocused on political issues in the region. Following Wednesday’s better than expected Eurozone PMI, there was further improvement in German business confidence as it hit a two-year high but the single currency failed to benefit and continues its downward trend. Yesterday the most significant news came from Germany where there was no final revisions made to the Q3 GDP confirmed at +0.2% quarter on quarter, leaving the year on year rate at +1.7%. The German GDP report showed that growth mainly came from domestic demand, especially private and government consumption. In France business confidence was also unchanged in November at 102.
No appetite for euros
There doesn’t seem to be much appetite for euros as investors fear the anti-establishment sentiment sweeping through the West could potentially threaten EU banks and stability. Donald Trump’s surprise US presidential victory has exacerbated significant vulnerabilities according to the ECB Vice President Vitor Constancio as Europe is bracing for a rocky ride. Significant political events starting with Italy’s constitutional referendum as early as December this year could threaten stability. The ECB is re-evaluating global risks as next year French presidential elections will then come into focus. The Netherlands and Germany will also hold their political elections in 2017 and political uncertainty in advanced economies can heighten uncertainties across the world.
Main focus on UK
Looking at today the main focus this morning in the European session will be on the UK where the Q3 GDP estimate is scheduled for release and is expected to confirm that GDP grew at +0.5% during the quarter. Also due out in the UK today is the CBI’s Distributive Trades Survey for November and French consumer confidence data is also scheduled this morning. Markets in the US should be quiet again today following Thanksgiving celebrations but nonetheless investors will be able to receive some data including the remaining flash November PMI’s services and composite, wholesale inventories and the advance goods trade balance for October. It is Black Friday sales in the US and in other parts of the world, so it would be worth keeping an eye on the figures coming out.