After a brief respite last week, the euro has this week resumed its decline against the US dollar. The single currency is now close to its lowest point in nine months against the US dollar. Economic releases have had less of an effect on euro performance over the last few days than geopolitics and the sentiment of the European Central Bank (ECB). The situation in Ukraine has remained unstable for an extended period of time and this week Russia has imposed counter-sanctions on EU food exports, which could be a major hindrance to trade given Russia’s importance as an EU export market.
The ECB kept interest rates unchanged at record lows yesterday, but President Mario Draghi’s address drew attention to the lack of consistency in Eurozone data and the precariousness of the recovery. This has been well demonstrated this week by the release of Italian growth data showing Italy slipping back into recession and poor industrial production data from Germany, Europe’s largest economy. Today we expect industrial production data from France, which is forecast to show growth after last month’s contraction. We also look forward to trade balance data from Germany, which gives the difference in value between imported and exported goods and services.