BarroMetrics Views: A Look At The Euro
” Where goes Germany, so goes the Euro”.
If that is true, how is the German economy faring, especially in the light of the Russian sanctions. I say this because Germany, Europe, is far more reliant on Russian trade than the US. For this reason, the sanctions will affect Germany more adversely than the US.
The sad fact is the Germany was slowing down before the sanctions. It reported that in the second quarter, its GDP declined by 0.2%. Add to that the fact that the Ukraine crisis is threatening German jobs. The German Committee on Eastern European Economic Relations has stated that the crisis could endanger up to 25,000.00 jobs. It also warned that the recent US sanctions have placed additional burdens “on the general investment climate”.
The pundits suggest that a Russian recession would reduce German growth by 0.5%.
Given the above, I would expect to see a weakening of the EUR against the USD and AUD. AUD? Weren’t we recently told that Australia saw one its the greatest unemployment since 1995? Yes we were; but what most did not say was that the definition for ‘unemployed’ had been changed ahead of the release. So, comparing the July headline number with previous headline numbers is failing to account for the new definition. In addition, some of the important numbers prior to the jobs number (e.g. retails sales) were stronger than expected.
So, yes I do expect the AUD to strengthen against the EUR.