“Concerns about a global downturn are deepening, as Germany’s economy shrank in the second quarter while growth in the 19-nation region came in at just 0.2 [percent].” Euro traders remain cautious as they anticipate an announcement from the ECB for fresh stimulus measures in September – an attempt to jump-start the ailing Eurozone economy – and fears for a German recession continue to haunt European markets.
Meanwhile, Italy’s recent political developments remain in focus with The League’s leader, Matteo Salvini, described as lacking credibility and subsequently ousted by his coalition partner, the 5-Star Movement.
This provided some uplift for the Euro as the presence of Salvini, a prominent Eurosceptic, increased the likelihood of an Italian exit from the European Union.
The pound failed to benefit when Prime Minister Boris Johnson gave bombastic reassurances that the EU would compromise on the Irish backstop.
Mr Johnson will meet French President Emmanuel Macron and German Chancellor Angela Merkel later this week.
Asked about the likely outcome, Mr Johnson insisted: “They have seen that the UK parliament has three times rejected the withdrawal agreement, the backstop just doesn’t work, it’s not democratic and I hope that they will see fit to compromise but in the meantime we get ready to come out on October 31.”
Labour leader Jeremy Corbyn continues to rally cross-party support in his efforts to prevent a no-deal Brexit, calling for a vote of no-confidence in the government.
Looking ahead, the pound to euro exchange rate could remain subdued on the strength of tomorrow’s German PPI for July which is expected to improve from -0.4 percent to 0.1 percent.