EurozoneThe decline in business activity in the eurozone could not but affect the macroeconomic indicators, which show a significant slowdown in momentum. GDP growth in Q3 at 1.7% year on year and at 0.2% relative to Q2 was the weakest in the last 4 years, with the slowest growth in the eurozone's strongest economy, Germany. On an annualized basis, growth slowed to 1.1% versus 2.3% a quarter earlier, while the immediate quarterly data showed a 0.2% drop, which clearly indicates a threat of recession.The growth in the employment rate is slowing down, the volume of industrial production in September has decreased by 0.3%, stagnation has been observed all last year.
Accordingly, forecasts for the near future are falling, by the end of 2018, GDP is expected to grow 2.0% instead of 2.1%, in 2019 1.8% instead of 1.9%.The main reason for the slowdown in the eurozone is the change in foreign policy conditions, first and foremost, undisguised US pressure. As a measure of coercion, duties were imposed on steel and aluminum, Europe under forced pretexts are being forced to refuse to cooperate with Iran. The undisguised pressure is being exercised in order to force to abandon important infrastructure projects, such as the construction of Nord Stream-2. The Brexit saga leads to uncertainty in trade relations with Great Britain. The front of the Italian government, which does not want to cut the budget expenditures under pressure from Brussels, cannot but affect the deterioration of business prospects.Today, the currency pair EUR / USD has no clear direction and will continue to trade in the range of 1.1310 / 70. At the same time, the long-term trend is still in favor of the dollar, so after an attempt to consolidate, the downward movement may resume.Great BritainThe pound received several rather sensitive blows at once, which contributed to a decrease in the November lows in the region, and at the moment, there is no reason to expect a return of bullish sentiment.The growth of the average wage at the maximum rate for 10 years gave reason to count on the growth of inflation, but the ONS report released on Wednesday showed that in September, inflation remained at the same level of 2.4%, which turned out to be worse than expected. On Thursday, pessimism added a report on retail sales in October, which also turned out to be worse than expected and worse than the September level. Despite the fact that the UK GDP growth in 3 square meters, accelerated, real household incomes are still below pre-crisis levels, and the sustainability of economic growth is still rather fragile.
Weak economic data, however, remain in the background, behind a policy. The threat of leaving Britain from the EU without a full-fledged agreement was synchronously voiced by German Chancellor Angela Merkel and French Prime Minister Edouard Philippe, who refer to the Cabinet's current political uncertainty and May's threat to lose the Prime Minister's position, and therefore, the EU is likely that the working paper is only a draft version, which until recently seemed to be a compromise and, on the whole, threatening both sides.All three scenarios, according to which events may develop further, have significant flaws. The current draft is not supported by the majority in parliament, as it threatens in the future the exit of Northern Ireland from the UK. The threat of exit from the EU without an agreement creates a lot of uncertainties, which can lead to a strong exit of capital from the country and slide into recession. Finally, the likelihood of a second referendum and remaining in the EU under the same conditions is blocked by Theresa May, who fulfills the will of the royal family, voiced in 2015.The currency pair GBP / USD will remain under pressure, as the Bank of England is losing ground for another rate increase early next year. Perhaps, there will be an attempt to find a base in the 1.2570 area, however, a decline to 1.2695 and a subsequent attempt to go below this level seems more likely.
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