The Euro (EUR) softened against the Pound (GBP) and US Dollar (USD) on Monday as it came under pressure from concerns over the Chinese economy and as an anti-EU party made gains in Germany’s regional elections.
With China, being a major trade partner for the already weakened Eurozone any news that its economy is showing signs of a slowdown is regarded as a negative for the Euro. Market sentiment took a hit over the weekend after data showed that Chinese industrial output fell sharply in August.
According to the data, Chinese factory production increased by 6.9% on a year on year basis in August, a steep drop from the previous months figure and was the slowest pace recorded since 2009.
Other reports also showed that retail sales growth and fixed asset investment also declined.
The Euro also received a knock from news that an anti-Euro party made gains in Germany’s regional elections. The Alternative for Germany won two eastern state parliaments and took 12.2% of the overall vote.
‘This gives us huge momentum. We won’t just sit back and let the other parties spout their empty rhetoric,’ said Bernd Lucke, the leader of the AfD.
A sign of growing support for anti-EU political groups is on the rise and has increased rapidly over the past few years as the Eurozone economy continues to stagnate and as unemployment remains near record highs
With economists focused on the USA and China, they shrugged off data, which showed that the Eurozones trade surplus rose on an annual basis in July. Exports outpaced imports, suggesting that growth could pick up in the third quarter of the year.
According to Eurostat, the trade surplus came in at €21.2 billion in July, up from €18 billion in the previous year. Exports increased by 3% year on year whilst imports increased by 1%. The surplus rose due to increased demand from the USA, UK and China.
The Pound was able to hold onto gains against the single currency despite pressure building ahead of Thursday’s Scottish referendum vote. Economists are forecasting that a Yes to independence vote could cause the Pound to drop 6-7%, whilst a No vote could trigger a bounce of 3-4%.
Expectations seem to be favouring a win for the no campaign but with polls indicating just a narrow lead the outcome remains far from certain.
The US Dollar meanwhile is likely to press higher against the Euro until midweek, as expectations grow that the Federal Reserve will edge closer to raising interest rates and ending its monthly bond-buying programme at Wednesday’s policy meeting.
Euro Exchange Rate News:
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