With the USA rethinking their stance on monetary policy, some of the pressure on the euro was relieved which saw it push towards three week highs against the US dollar. There have been doubts surrounding the US Federal Reserve’s plans to end quantitative easing at the end of this month. However, the weakened state of the European economy should make any long term positive momentum a tough task for the euro.
Looking forward to the week ahead, we will see Purchasing Manager’s Index (PMI) figures out across Europe. Data is expected to show growth stagnating for the Eurozone as a whole and contracting for the German economy. Not good news for the euro making it ever more likely that the ECB will have to introduce quantitative easing in the not too distant future. Further problems could arise when the European Banking Authority hand the results of stress tests that they have been undertaking on the banks to over 100 of the largest Eurozone’s lenders. These results are made public three days later and the news is not expected to be good as most commentators have been highlighting for a while that more needed to be done to boost banks’ balance sheets. The UK banks are not expected to be among those who have to raise additional capital.