This follows comments from European Central Bank chief Mario Draghi, who took a dovish turn this morning saying that cutting interest rates would become “increasingly likely” should the Eurozone’s inflation situation fail to improve. Michael Hewson, a Chief Market Analyst at CMC Markets, was also concerned about the Eurozone’s economic health. He said: “With inflation once again sliding back close to 1 per cent in May, markets are slowly coming to the conclusion that the ECB is operating at the limits of what it can actually do by way of conventional monetary policy.” Eurozone car sales, meanwhile, rose by 0.1 per cent in May – their first rise in nine months – with sales in Germany surging by 9.1 per cent, according to the European Automobile Manufacturers’ Association.
However, analysists have remained cautious, saying that the economic climate is still “fragile”.
Peter Fuss, a partner at EY Consultancy, was downbeat.
He said: “Given the gloomier economic outlook and the unresolved Brexit issue, these markets are likely to see even more downturn as the year progresses.”
Today will see the release of the German ZEW Survey for economic sentiment for June today, and with the forecast being a decrease of -5.9, we will likely see the single currency weaken further against the pound.
Eurozone inflation data is also due out today. Any signs of improvement would prove euro-positive.
The pound, meanwhile, has remained muted as political developments continue to unfold, with Philip Hammond, the Chancellor of the Exchequer, saying that he had considered quitting over Theresa May’s spending plans.
Mr Hammond was referring to Mrs May’s planned £27bn expenditure on education over the three years.
Focus remains on the Conservative Party leadership race, however, with Boris Johnson gaining increasing support as his former leadership rival, Andrea Leadsom, has thrown her support behind him.
She said: “I think he is someone who can bring the country and the party back together and take us forward in a positive way.”