EUR/USD has edged higher in the Monday session, erasing much of the losses seen on Friday. Currently, the pair is trading at 1.1369, up 0.29% on the day. On Sunday, European Union leaders formally endorsed the Brexit withdrawal agreement. German Ifo Business Climate dipped to 1o2.3, shy of the estimate of 102.0 points. Later in the day, ECB President Mario Draghi will testify before the European Parliament Economic and Monetary Affairs Committee. There are no U.S. events on the schedule. On Tuesday, the U.S. releases CB Consumer Confidence, which is forecast to dip to 136.2 points.
A milestone of sorts was reached on Sunday, as the 27 EU leaders gave their approval to the Brexit withdrawal agreement, as well as a political declaration on economic relations between Britain and the EU after Brexit. The event was solemn, and EU leaders took pains to warn British parliamentarians that there will the EU will not agree to any further concessions. Dutch Prime Minister summed up the mood in Brussels, saying “there is no Plan B”. The EU has signaled that the deal signed on Sunday is “take it or leave it” – if the U.K. doesn’t sign on, the result will be a hard Brexit. which could be catastrophic for the British economy. Prime Minister May joined the summit on Sunday and again urged British lawmakers to approve the deal, saying it met most of Britain’s demands. Still, May will have an uphill battle pushing the deal through parliament, with the Labor party and a many Conservative MPs set to vote against the deal.
German GDP and PMI reports pointed downwards on Friday, putting pressure on the euro. Final GDP declined 0.2% in the third quarter, in line with expectations. This marked the first decline since 2014 and was identical to Preliminary GDP, which was released last week. Manufacturing PMI fell to 51.6, pointing to a stagnant manufacturing sector. This marked a fourth straight drop in manufacturing activity. Services PMI dropped lower, with a reading of 53.3 points. Both indicators missed their forecasts. The contraction in growth has weak PMIs is bound to raise concerns – is the long German expansion over? German officials attributed the weak GDP releases to new emission standards for German cars, but it’s likely that the drop can also be attributed to a weaker global economy due to the ongoing trade war between the U.S. and China. With no sign that the two super-economies will reach an agreement anytime soon, the eurozone economy could face more headwinds, which in turn could weigh on the euro.
