Core Europe Showing Uneven Growth

Alan Penny

29 November 2019

2 min read

Forex trading news

  • German Retail Sales misses
  • French Consumer Spending as expected
  • French Preliminary CPI slightly better
  • French Luminary GDP as anticipated
  • German Unemployment Change better than expected

Early on Friday there were several economic announcements coming out of the core of Europe. They showed a mixed picture when it comes to the European Union. Because of this, there’s more to think about when it comes to the EU and what the ECB will be doing going forward. The fact that Germany and France continue to show unfavourable results shows just how much work there is still left to do to improve the economic outlook in that part of the world.

Let’s talk numbers in Europe

German Retail Sales month-over-month came out at -1.9%, as opposed to the expected -0.2%, showing that the German consumer still cautious over spending money. This is a far cry from any hint of inflation out of the European Union, so it’s unlikely that monetary policy tightening will occur anytime soon.

it’s unlikely that monetary policy tightening will occur anytime soon

The next announcement was French Consumer Spending month-over-month, coming out at 0.2%, as anticipated. The French Preliminary Consumer Price Index month-over-month was 0.1%, showing slightly better numbers than expected as it was thought to come out flat. French Luminary GDP quarter-over-quarter came out at 0.3%, again as expected. Finally, German Unemployment Change figures came out at -16,000, which is much better than the expected 5000.

With that being said, the economic figures in the European Union continue to be all over the place, and it’s difficult to imagine that monetary policy is going to change.

The core of Europe is what decides what happens with the ECB more than anywhere else. As a result, it’s likely that the Euro will continue to be a bit soft going forward

Beyond that, stock markets will be looking to the ECB in order to start buying again. Loose monetary policy could give more of a boost for places like the DAX, CAC, and possibly even the IBEX. Despite this, European stock markets will probably enter a more monetary policy based cycle.

Monetary policy boosting the trading markets

In the past decade, a lot of trading has been done based upon loose monetary policy, as it gives the markets a boost. The market will more than likely watch the transition from Mario Draghi to Christine Lagarde, which so far looks like it’s going to bring in more loose monetary policy.

It’s expected that the market participants will continue to support the markets, if no other reason than because the monetary policy in the European Union is going to continue to work against the idea of putting money into bonds for any type of yield. However, Europe has a long way to go before standing on its own, so expect more central bank help.

Written By
Alan Penny

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