14.11.201817:53 Forex Analysis & Reviews: Brexit: Theresa May needs to really try. Eurozone economy will continue to create problems for the ECB

The European currency fell in the first half of the day against the US dollar, as well as the British pound, which yesterday rose rapidly on the news on Brexit. In the morning review, I spoke in more detail about the preliminary agreement that was reached yesterday during the negotiations.

Germany's economy as another reason for excitement

In the first half of the day, data came out that slightly upset investors and traders, as they pointed to the slowdown in the growth of the German economy in the 3rd quarter of this year. According to the report of the Federal Bureau of Statistics of Germany, the German economy in the 3rd quarter of 2018 decreased by 0.2% compared with the previous quarter. However, the bureau says that a sharp decline is not expected.

Compared to the same period in 2017, the German economy grew by 1.1% year on year, after rising 2.3% in the 2nd quarter.

The sharp decline in economic growth is associated with the problems of passenger cars, which arose after the introduction of a new emission control protocol. It is expected that growth will resume in the 4th quarter of this year after car manufacturers once again begin to gradually increase activity.

Also, the decline in Germany's GDP was due to problems in foreign trade, where exports declined and imports increased compared to the 2nd quarter. It is expected that Germany's GDP in 2018 will be equal to 1.6%, and not 2.3%, as was predicted earlier.

The data on industrial production in the eurozone directly indicate a likely decline in economic growth in the 3rd quarter of this year. According to the report, industrial production in the eurozone in September of this year fell immediately by 0.3% compared with August. Compared to the same period in 2017, the growth was only 0.9%. Economists expected a decline in industrial production, but only by 0.2%. Back in August, the figure showed an increase of 1.1%.

The alarm for the European Central Bank is another assessment of the growth of the eurozone economy in the 3rd quarter of this year. According to a published report, the eurozone's GDP in the 3rd quarter grew by 0.2% compared with the second quarter, which fully coincided with economists' forecasts. In annual terms, growth was 1.7%. A decline in confidence, paired with a slowdown in external demand, will continue to limit the growth of the eurozone economy in the future.

The British pound remains under the scrutiny of traders, as can be seen in market volatility. Investors are actively responding to any news related to Brexit. Let me remind you that in the afternoon a meeting of the British Cabinet of Ministers is scheduled, at which an agreement on Brexit can be approved.

However, investors' optimism can be quickly dispelled after the draft agreement is passed to parliament with the approval of the British Cabinet of Ministers. It is there that all the difficulties will begin since it will be much more difficult for Prime Minister Theresa May to convince the representatives of the Labor Party and the Scottish National Party of the need to support the agreement. Many have already spoken out against the deal, without even reading its terms.

The data, which came out today on annual inflation in the UK, did not greatly affect the market.

According to the report of the National Bureau of Statistics of the United Kingdom, CPI in October of this year grew by 2.4% compared to the same period of the previous year, which fully coincided with economists' forecasts. Let me remind you that the Bank of England has repeatedly drawn attention to inflation, which went beyond the target level of 2%. This suggests that the Central Bank is likely to continue to adhere to the strategy of raising interest rates, not taking into account the situation with tough Brexit.