Slowing Eurozone hits EUR - NBF

According to analysts at National Bank Financial, EUR has managed to hold its ground against the USD in January despite ugly economic data that confirmed an economic slowdown.

Key Quotes

“True, the common currency area grew a decent 1.8% last year. But the second semester, which saw real GDP grow less than 1% annualized, was the worst in five years.”

“Another risk for the euro is the potential for further distruptions to trade flows. Last year’s deceleration of global trade and ensuing moderation in the eurozone’s economic growth highlights the common currency’s vulnerability. A “hard” Brexit on March 29th, whereby the UK leaves the single market and the customs union, cannot be ruled out amid an apparent paralysis of UK leadership.”

“We continue to expect common sense will prevail among world leaders, enough to leave global trade flows largely unimpeded. Under this base case scenario, we see the euro appreciating against the greenback over the forecast horizon helped by USD weakness and expectations of yields improving in favour of the common currency given that the U.S. fed funds rate is already close to neutral.”