After starting on fairly stable footing, trading in quite a narrow range against sterling and the US dollar, the euro’s week took a turn for the worse on Wednesday. Business climate figures released from Germany, the bloc’s most influential member, came in well below forecasted and even further below the previous figures. As an immediate result, we saw the currency fall against the majority of its most-traded peers, and below 1.28 against the US dollar for the first time in 14 months.
On top of this, Wednesday also saw Barclays lower their 12-month forecast for the euro-US dollar pairing significantly from 1.25 to 1.10, indicating just how pessimistic sentiment is amongst some traders. Things did not get any better for the euro, with European Central Bank (ECB) President Mario Draghi leaning further towards an increase in stimulus measures, admitting in a speech yesterday morning that the recent interest rate cut had not had the desired effect. Combined with a particularly strong sterling, this announcement pushed sterling to fresh July 2012 highs against the euro.