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Europe still grows, gets boost from unlikely sources

The Eurozone's economy appears to be fighting back as Brexit cross-party talks could end with a compromise solution on the table.

Europe still grows, gets boost from unlikely sources

The Eurozone’s economy grew faster than expected in the first quarter of 2019. Gross Domestic Product (GDP) growth jumped to 0.4 per cent, double the 0.2 per cent recorded in the final three months of 2018.

The figures were buoyed by Italy’s recovery from recession, posting 0.2 per cent growth against quarter-on-quarter contraction of 0.1 per cent. Spain also beat expectations with 0.7 per cent growth. The release showed that despite Germany is struggling with a slump in manufacturing orders and exports, other bloc members managed to pick up the slack.

The Euro responded to the positive data by trading above 1.1200 against the Dollar for the first time in a week.

The Pound also had a boost on positive sentiment about Brexit. Cross-party talks between the Conservative Party and the opposition Labour Party appear to be making ground, with 10 Downing Street expecting to reach a conclusion next week. Sterling rallied over a cent against the greenback and 60 basis points against the single currency.

This morning, the UK will release Purchasing Managers’ Index, confidence data for the manufacturing sector. The sector has posted strong numbers for 2019, mainly boosted by stockpiling due to Brexit. Now that the departure from the European Union has been delayed, will the confidence levels have dipped lower than the 53 forecast and down from 55.1 in March? Any number above 50 shows expansion.

Later today, the US Federal Open Market Committee (FOMC) will announce its latest interest rate decision. Despite a booming labour market, the US has missed inflation and growth targets in the first quarter of 2019. Any dovishness from Fed chair Jerome Powell likely to cause volatility for the Dollar.

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