German Woe

by | Oct 10, 2014

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Neil Davies, Head of Trading at PlutusFX, highlights a sharp decline in Germany.

While around the world the news headlines this week have featured the rapid rise of Ebola in West Africa and its arrival in Europe, within the EU it has been the sharp decline in the German economy that has driven economic concerns.

The euro itself, having had a rest bite rally for the first three days of the week, has once again trended downwards, currently sitting at EUR/USD 1.267. Whereas we have become accustomed to the news across the zone being repeatedly of decline in Southern Europe and France, Germany has, almost single handed, been able to keep the economic growth head above water, but only just. Now it would appear that Europe’s biggest economy is leading the pack down, with reports today that the German Government will be slashing its economic growth forecast for both 2014 and 2015, to just 1.25%. That won’t be enough growth to keep the Eurozone out of recession.

With the Ukraine crisis being shoved out of the headlines by both Ebola and IS, it remains a factor in the huge German export dip of 5.8% in August from July. Over the same period industrial production shrank by 4% with factory orders down 5.7%. Apparently the change in the timings of the holiday period had also been a significant factor.

Fears over worldwide economic growth have caused turbulence in stock markets this week, with volatility at a year high, yet it would appear that the whereas the likes of the UK and the US may be able to claim some immunity from the spread of both virus and terrorism through geographic location, Europe cannot claim the same and is perhaps at the highest risk of being dragged down further by issues that have barely been factored in.

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