According to recent forecasts by the European Commission, the executive arm of the EU, Germany is in for a long-lasting recession this year, as the only major European economy to experience an economic downturn in 2023. According to analysts of investment banks and financial strategists, it is expected that the largest European economy will show a decrease in economic activity by 0.4% this year, which is 0.6 percentage points less than the estimate from May of this year 2023, according to the European Commission, which published new forecasts today, Monday, September 11, 2023. The institution also lowered its growth expectations for Germany next year 2024, from the initially discarded 1.4% to a new estimate of 1.1 percent growth. Germany’s economy struggled after Russia’s invasion of Ukraine, with Berlin having to quickly end years of energy dependence on the Kremlin. The International Monetary Fund said in July 2023 that Germany was likely to contract by 0.3 percent this year.
These facts, which have persisted in the minds of investors practically since the spring of this year 2023 and are now confirmed by a well-founded estimate of the European Commission, created an investment sentiment that, with one exception, maintained the mutual exchange rate of the single European currency, the euro (EUR) and the US dollar (USD) below exchange rate limit of USD 1.10 per EUR, practically at least since the beginning of this year 2023. Currently, during the Monday European afternoon of September 11, 2023, at approximately 13:44 CET, the mutual exchange rate of this so-called global currency pair EUR/USD traded at $1.072 per EUR with the EUR up +0.20% against the USD on the day so far. This mutual exchange rate was achieved in a situation where the main world reserve currency, namely the US dollar (USD), as at the same time the main currency of the world’s commodity trades, was moving in a trading trend of a decrease in its exchange value against other world currencies on the day and time mentioned. According to the dollar index DXY (US Dollar Currency Index), the value of the USD was at a point level of 104.72 USD points with a daily decrease of -0.35% of the point value according to this index.
The latest economic forecasts point to a general slowdown in the entire region, not only in the eurozone, but also in the other member states of the European Union, which are not yet among the countries paying the euro as their domestic currency. The 27 EU economies are expected to grow at an average rate of 0.8% this year, which is less than the estimated one percent from May this year 2023. Next year 2024, this picture of the development of the EU economy is also worse than originally predicted. The EU is expected to grow by 1.4% instead of May’s estimate of 1.7%. “The weakness of domestic demand, especially consumption, shows that high and still rising consumer prices for most goods and services are taking a bigger toll than expected,” the European Commission said in a statement on Monday 11/09/2023. High inflation remains one of the main challenges in the bloc. The latest forecasts show that consumer prices will fall in the coming months, but are likely to still be above the European Central Bank’s (ECB) 2% target by the end of 2024. Total inflation in the eurozone, where 20 EU countries share the same currency, is seen at 5.6% in 2023 and then at 2.9% until the end of 2024. Based not only on these facts, the financial strategists of the foreign exchange market rather predict another possible decline exchange values of EUR to USD than the possibility of permanently overcoming the exchange rate limit of 1.10 EUR to USD.