The Eurozone has difficult growth prospects and also faces growing risks for external scales. In addition, the European Central Bank (ECB) is likely to raise rates at a slower and more gradual pace than many others. All of this points to a weak outlook for the euroin the opinion of the economists of HSBC.
Regional economic news is very challenging
“Euro bulls had held out hope that the apparent sharp manufacturing slowdown would be offset by a strengthening in services. However, it does not appear that this shift in demand from goods to services (such as travel and leisure) is materializing. Indeed, signs of travel disruption across Europe may limit the positive contribution of this sector during the summer.”
“Risks to the eurozone’s external balances are growing. Export growth remains weak and high commodity prices are driving up the region’s import bill.”
“If the ECB holds its line, we will only see a 25 basis point hike at their meeting on July 21 – at a time when others are rising much faster – and we will wait for their meeting on September 8 to be produce a faster tightening, while there is little support from higher yields. All in all, this translates into a weak outlook for the euro.”
Source: Fx Street
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