The euro had another reasonably strong day despite the absence of little in the way of positive data from the Eurozone. The single currency strengthened further against the US dollar as the interbank rate again rose above 1.38. However, the euro depreciated against sterling, as did other major currencies, as a result of strong UK manufacturing data.
Concerns are growing that the euro is currently overvalued and that this is having a negative effect on the recovery of the eighteen-nation bloc. These sentiments were espoused by the Belgian Finance Minister Koen Geens as he expressed worry that a strong euro is harming his nation’s export prospects. If such sentiments become more widespread, we would expect to see the single currency adopt a more negative trajectory. However, while the Eurozone continues to stave off the threat of deflation, trader confidence seems sustained. In the short term, today sees the release of German Trade Balance data – a measure of the difference in value between imported and exported goods and services. These figures from the Eurozone’s largest economy may have a bearing on performance as they tend to give an indication of demand for the euro and whether or not investors should give credence to the fears of the likes of Koen Geens.
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