Pound euro exchange rate: Weakening eurozone data sparks fear in ECB policymakers

The latest disappointing data point came from Spain this morning, which revealed a sharp -2.6 per cent contraction in industrial output in November. This was quickly followed by figures from Italy, which also fell into contraction territory as industrial production shrank 1.6 per cent in the same month; worse still was the yearly figure, which slipped 2.6 per cent, even though an expansion was forecast. Although not part of the Eurozone, Denmark is closely tied to the currency bloc and it too revealed an industrial contraction in November. This latest run of dismal data will no doubt worry EU planners, especially in light of yesterday’s minutes from the European Central Banks’ (ECB) policy meeting, which revealed policymakers are increasingly split in their outlook for the Eurozone economy in 2019.

On the one hand unemployment is at a 10-year low, but at the same time inflation and growth is slipping as export orders dry up and the German economy hovers perilously close to a recession.

Despite these worries, markets today have decided that Brexit jitters outweigh Eurozone economic concerns, giving the euro the upper hand against the pound.

This could soon change if French “Yellow Vest” anti-government protestors carry through with their threat to cause economic damage to the nation after it was announced that a new law was being considered to make all forms of protest illegal.

Yellow Vest protestors responded by vandalising some 60 per cent of all speed cameras across the nation, blocking the lenses with yellow safety vests, and calling for all “patriots” to withdraw their savings from banks in an effort to cause a run on the banking system.

Given that commercial banks only hold a small amount of deposits, such a move, if it gains momentum, could cause serious economic damage to the French banking system, and the wider Eurozone.

Meanwhile, on this side of the English Channel, the latest UK GDP figures have been released, with November’s figure printing at 0.2 per cent – twice as high as had been expected.

This result, whilst positive, came alongside some disappointing manufacturing production figures which, like the European counterparts, revealed a contraction in November.

source: express.co.uk