Currency Note Euro

Euro under pressure as worries over Eurozone economy persist

By Smart Currency May 12th, 2014

The single currency continued its slide towards the end of last week as it dropped back below the 1.38 threshold against the US dollar, reaching a one-month low, while also weakening slightly against sterling. The ongoing weakness was largely representative of the continued reaction to European Central Bank (ECB) President Mario Draghi’s address last Thursday. A number of major institutions have predicted that the ECB will further cut interest rates to negative levels when it next meets on 5th June, causing the eighteen-nation currency to lose ground across the board.

Data releases are slightly thinner on the ground this week, although considerable movement in rates is not unlikely given the magnitude of Draghi’s statement last week. Some releases that may prove to be additional stimuli for currency fluctuations include German ZEW Economic Sentiment Data on Tuesday and the preliminary growth releases on Thursday. The ZEW Economic Sentiment data will reflect the view of German investors on the Eurozone’s economic outlook and it will be interesting to see how Europe’s largest economy reacts to last week’s news. Figures have been declining throughout 2014 and are forecast to continue. A halt in the decline could provide a small boost for the euro, whereas worse-than-expected figures are likely to hasten the weakening of the single currency. The situation in the Ukraine will not be helping German sentiment. Preliminary growth figures from across the eighteen-nation bloc are key indicators of economic recovery and the outcome here will also have the potential to have a bearing on euro performance.

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