Currency Note Euro

Interest rate worries undermine the euro

By Smart Currency January 28th, 2014

German Business Climate data failed to have any significant effect on the performance of the single currency yesterday as figures were only marginally better than expected. The euro weakened against sterling during the morning, causing the rate to move back towards the highs seen last week, whilst fluctuations were more limited against the US dollar.

The European Central Bank (ECB) still remains under pressure as interest rates in the Eurozone remain volatile. ECB President Mario Draghi stated last week that further policy decisions would be taken should interest rates keep climbing above the Central Bank’s 0.25% benchmark. Further interest rate reductions or a further loosening of monetary policy would have a negative impact on euro strength so the discussions at the next ECB meeting on 6th February are likely to be a cause of volatility.

Today sees little in the way of data releases for the Eurozone, but fluctuations may continue in response to the day’s Economic and Financial Affairs Council (ECOFIN) meetings in Brussels and on-going speculation.

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