Russian Sanctions Have a Dramatic Effect on the Eurozone’s Economic Grow

As conflict between Russia and Ukraine continue, tough sanctions have been placed against Russia. As a response to those sanctions, Russia has banned the import of food products from the United States, European Union, Australia, Canada, and Norway. In a report issued by Bundesbank, this is said to be the cause of a German economic slowdown as well as a slowdown in the entire Eurozone. Today, we’ll dig into the numbers, and see if geopolitical issues are wreaking havoc or if Germany and the Eurozone have deeper matters to face.

The Numbers and Statements Reported For Q2
In the second quarter report provided by Bundesbank on Thursday, we saw the German economy retract by 0.2%. While the economy has retracted a bit, they held their prediction for 2014 annual economic growth to be 1.9% and 2% in 2015. In the report, the Frankfurt-based Central Bank stated that “We don’t see any need to correct our growth estimate…” despite the fact that the country’s growth retracted through the second quarter. The report goes on to state that “Geopolitical risks are burdening the German economy but the basic economic trend remains positive.”

However, there are some clear signs of concern in the report as well. Those signs include one of the strongest statements in the report…

“Expectations for a strengthening of economic momentum in the second half of 2014, which underline the spring projections, have been thrown into doubt by current data.”

As a result of the poor report, many economic analysts have reduced their predictions for German economic growth through 2014. While Bundesbank holds its predictions at 1.9% growth throughout this year, those experts are expecting an average of around 1.5% growth this year.

What Caused The Downturn In German Growth?
The report released by Bundesbank clearly blames geopolitical issues for the slowing of German economic growth. Stating that…

“The economic momentum in some member countries of the European monetary union is weaker than expected. At the same time, it seems geopolitical tensions in Eastern Europe as a result of the Ukraine conflict as well as in other parts of the world now weighs more on business confidence.”

However, some experts say that although geopolitical issues are putting a strain on the German economy, they’ve got deeper internal problems that need to be addressed. An article on the New York Times blames poor financial decision making with regard to reduced retirement ages, increased minimum wages, and changes to other programs.

Opportunity for Options Traders
Because Germany is considered to be the powerhouse of the Eurozone economy, this poor second quarter report has caused the Euro to fall quite substantially over the past 5 days. On Monday, the 18th, the Euro traded at a high of 1.3399 United States Dollars. However, the currency value is currently down to 1.3252 United States Dollars and continuing to fall. So, as a currency option trader, you can bet that we’ll continue to see the same trend for a while, and turn the bad news in the Eurozone into “in the money” trades.

This article was written by Joshua Rodriquez for anyoption.com