- Growth for 2017 downgraded from 1.6% to 1.4%
- Growth for 2018 now 1.6% from 1.7%/li>
- Draghi supports Italy bank bailout/li>
- Friday’s CPI data could impact the Euro/li>
A survey produced by experts have lowered growth for the Eurozone in the wake of Brexit, down-revising growth for both 2017 and 2018. Expectations for 2017 now sit at 1.4% down from 1.6%, whilst 2018 has been downgraded to 1.6% from 1.7%.
Despite Draghi’s reassurance in stabilizing the Eurozone, he may need to implement further stimulus to limit the impact of Brexit, although his options are limited given current interest rates sit at 0%
As of yet, the ECB are keen to monitor the data post-Brexit and will act once further data comes to light.
Italian banks cause concern for the Eurozone
The Italian banks have been disproportionally hit by Brexit with non-performing loans dating back to the recession. Mario Draghi has pledged support for the Italian banks and will implement measures if Friday’s banking stress tests at 9pm highlight concerns.
With much of the attention being on the UK after last month’s historic vote, it’s unlikely that the Eurozone will escape economic damage as a result of the referendum. Concerns in Greece and now Italy could be early signs of further of EU disintegration, coupled with the recent terrorist attacks there is further reason to be wary of EU stability.
Economic releases for the Euro may force Draghi to act
If Friday’s preliminary CPI data comes out negative, Draghi may be forced to inject further QE which has of yet, has been proven to have limited to zero success. There is a possibility he may look to cut rates to negative territory although German Finance Minister Wolfgang Schauble has opposed further cuts as harmful to German savers.
We could see the first signs of economic instability for the Eurozone this week and those looking to sell Euro’s for Sterling may want to do so after the UK’s CPI figures on Wednesday.
