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Germany's Economic Ripple Effect
Germany's sagging economic outlook must contend with the ECB's hawkish outlook
Mobius Intel Brief:
Germany’s August inflation data showed that price pressures in Europe’s largest economy eased -0.1% from July, growing by 1.9% Y/Y.
While Germany’s print supports the European Central Bank’s (ECB) rate cut outlook, separate anecdotal data suggests Germany’s hopes for positive economic growth in 2H24 are fading faster than ECB officials can safely ease without fanning currency volatility and liquidity risks.
Like many major central banks, the ECB must caution against widening yield spreads with U.S. sovereign debt.
Meanwhile, Germany’s economic tumult spreads beyond its borders as top trading partners like Switzerland warn markets of the compounded effects of dampened demand on decade-high Franc-Euro exchange rates.
As discussed below, energy policy plays a material role in Germany’s uncertain 2H24, with consequences evident in business sentiment, investor expectations, and rapidly rising bankruptcies.