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Euro Exchange Rate Falls against GBP (EUR/GBP) and USD (EUR/USD) as Risk of Eurozone Triple dip Recession Rises

The Euro (EUR) weakened further against the Pound (EUR/GBP) and US Dollar (EUR/USD) on Friday and looks set to make further declines as data out of Germany confirmed that the Eurozone’s growth engine is stalling and that core inflation across the region continued to fall.

Retail sales in Germany plummeted to their lowest level in seven years in September, when added with the awful industrial production figures published earlier in the month it does not make pretty reading and things are looking grim for the Eurozone’s largest economy.

According to the data compiled by the German Federal Statistics Office, retails tumbled sharply by 3.2% in September. It was the biggest decline recorded since May 2007. The fall was far worse than the 0.8% drop predicted by economists and was a sharp drop from August’s positive figure of an increase of 1.5%.

Recession in Germany more likely

‘A drop had been expected after the strong August, but not this kind of dramatic fall. It is bad because it makes a recession in Germany more likely. Pressure on the European Central Bank is growing as things are not going well even in Europe’s largest economy,’ said Nordea Bank economist Holger Sandte.

The poor German data added to another disappointing data release from France, the Eurozone’s second largest economy. Consumer spending in the nation fell more than forecast by -0.8% in September.

Analysts had been expecting a figure of -0.3%. With the economies of the Eurozone’s top two economies going down the toilet the chances of the region sliding into a triple dip recession are increasing.

Unemployment is high in France and sentiment towards the country remains weak due to the policies of the French government.

Unemployment data for the wider Eurozone showed that the unemployment rate remains stuck at 11.5%. The jobless rate in Italy increased unexpectedly last month to rise to 12.6%, taking economists by surprise as they had been forecasting for a fall to 12.4%.

Inflation remains in the danger zone

A separate report released by Eurostat showed that inflation across the currency bloc inched higher to 0.4% in October to match expectations. Despite the rise, inflation remains well below the ECB’s inflation target and has now done so for a 21st month in a row.

Some economists may see the inflation rise as a positive, but when you look at the core inflation rate that strips out some volatile components, it in actuality fell from 0.8% to 0.7%.

ECB President Mario Draghi previously said that an inflation rate below 1% is in the danger zone that could lead to prices entering a deflationary spiral.

Euro Exchange Rate News:

[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.2584 ,
Euro,,British Pound,0.7862 ,
Euro,,Australian Dollar,1.4257 ,
Euro,,Canadian Dollar,1.4089 ,

As of 11:25 am GMT