The Euro Should Continue the Bearish Path As German GDP Growth Gets Cut
The economy of the Eurozone has been weakening for more than a year. the manufacturing and industrial sectors are in contraction in most major countries as this sector continues to suffer on a global scale, mostly due to the trade war, but also due to the fact that major central banks tightened the monetary policy too quickly and removed the stimulus packages that had been keeping major global economies afloat since the financial crisis.
Certain economies have fallen in contraction such as the UK in Q2 and economists anticipate even a possible recession. German manufacturing is in deep recession already which has been affecting the economy negatively. Growth has been slowing considerably and now German institutions have revised economic growth for the next tow years lower.
IfW and DIW cut their 2019 GDP forecasts for the German economy as follows:
- IfW sees German economy expanding by 0.4% in 2019 down from 0.6% previously
- Sees 2020 GDP at 1%, down from 1.6% previously
- Notes that German economy likely to shrink by 0.3% in Q3
- Therefore, falling into a technical recession
- DIW sees German economy expanding by 0.5% in 2019, down from 0.9% previously
- Sees 2020 GDP at 1.4%, down from 1.7% previously
- Further risk next year comes from no-deal Brexit
- If that happens, it would slash a further 0.4% off 2020 GDP
Do, IfW sees a technical recession inQ2 and Q3 together. last year we saw Italy fall into a technical recession and it might do so again since it is heading that way. Things are getting worse also, instead of getting better as the Eurozone economy continues to weaken, so I expect the bearish trend to continue in Euro pairs.
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