Data released on Thursday revealed the French economy exceeded expectations, expanding 0.3 percent during the second quarter, matching growth rates for the first three months of 2019. This suggests the French economy may be more resilient to a Eurozone slowdown than others, including Germany whose economy shrank and could contract again. European Commission data revealed improved economic sentiment as the index rose from 102.7 in July to 103.1, spurred by rising optimism in retail and industry sectors, particularly those of Spain.
Added to this, the Eurozone’s business climate indicator rose from July’s -0.11 to 0.11.
Wednesday saw the pound slump following Boris Johnson’s move to prorogue British Parliament, shifting the Queen’s annual speech to 14 October and narrowing the window in which cross-party opposition might pass legislation to block a no-deal Brexit.
The Prime Minister has denied the controversial move – described by critics as undemocratic and even unconstitutional – is designed to prevent a parliamentary obstruction of his Brexit plans.
However, head of research for global markets at MUFG, Derek Halpenny noted the ‘incredibly narrow window’ this imposes for a no-confidence motion:
“Today’s development brings us firmly into the realms of a constitutional crisis.
“No-deal Brexit is looking ever more likely, Sterling downside risks will continue to plague the market.”
Looking ahead, the single currency is likely to remain under pressure following this afternoon’s release of the German inflation rate. If this disappoints, the euro could slide.
Meanwhile, Friday could see the euro buoyed against the pound if July’s German retail sales data rebounded from a disappointing result in June.