The euro struggled this week, falling to a 1 month low against the US dollar and dropping to the lowest point against sterling since the summer of 2012.
Fears escalated that we could be headed for a banking crisis in Portugal on Tuesday as a proportion of a €900million debt related to Banco Espirito Santo went unpaid; however, since then these fears have subsided. On the data front, worse-than-expected Industrial Production data combined with a poor German ZEW Economic Sentiment survey which came out at the lowest level since 2012 did little to help the euros slump.
Mario Draghi was speaking on Monday and stated that he felt a strong euro could put the Eurozone’s economic recovery at risk; however, he also made clear that the European Central Bank (ECB) does not have an exchange rate policy.
Monthly Consumer Price Index (CPI) figures released yesterday showed the euro area annual inflation was at 0.5%. Inflation in the eurozone remains worryingly low, much lower than the ECB’s 2% target, what is more, the ECB stated that if inflation remains low they would look to embark on a quantitative easing programme to support the Eurozone’s economy.
It’s a quiet day on the data-front in Europe; but any comments from the President of the German central bank could cause a reaction in the markets.