The Euro continued to fall against the US Dollar and a basket of currencies on Tuesday as the Cypriot parliament prepares to reject the controversial bank deposit levy crucial for the small nation to secure a bailout, raising fresh fears of instability across the Eurozone.
A rejection of the deeply unpopular deposit tax plan would inject fresh volatility into financial markets and weigh on the Euro further. Safe-haven German bund futures were higher while European stocks fell in opening deals as did bond prices of heavily-indebted countries like Spain and Italy. Fears that similar action could be implement in other struggling European countries has also spooked the markets with fears of a bank run remaining high.
“If the vote doesn’t go through, it would lead to another precipitous fall in the euro as worries about a banking crisis will escalate,” said Adam Myers, European head of FX strategy at Credit Agricole, who expects the Euro to drop to $1.27 in coming months.
Tuesday also saw the release of the latest ZEW surveys for German and Eurozone economic sentiment. Sentiment in Germany saw an unexpected improvement in March, rising to its highest level since April 2010. The figure inched up by 0.3% to 48.5 in March from February’s reading of 48.2. On the index, a level above 0.0 indicates optimism; a level below 0.0 indicates pessimism.
Eurozone sentiment meanwhile fell by 9.0 points to 33.4 in March from a reading of 42.4 in February taking economists by surprise as they had been expecting sentiment to show signs of improvement. It’s not clear why thy thought there would be any improvement as the jobless rate continues to increase, GDP continues to fall and the prospect of growth is virtually non-existent save for Germany.
The Euro could recover some of its losses if the Cyprus situation sees signs of improvement, rumours abound that the Cypriot government may drop the tax for depositors with savings of €20,000 or less.
Current Euro exchange rates
As of 10:35 am
The Euro to Pound Sterling exchange rate is currently trading in the region of 0.8561
The Euro to US Dollar exchange rate is currently trading in the region of 1.2941
The Euro to Australian Dollar exchange rate is currently trading in the region of 1.2482
The Euro to New Zealand Dollar exchange rate is currently trading in the region of 1.5699
The Euro to Canadian Dollar exchange rate is currently trading in the region of 1.3240
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